Financial Institution Risk Management in Jamaica: FSC Strengthening Its Capabilities
The Financial Services Commission (FSC), the regulatory body responsible for overseeing non-deposit taking financial institutions in Jamaica, has announced plans to strengthen its risk management capabilities.
Enhancing Risk-Based Supervision
According to Everton McFarlane, Executive Director of the FSC, the entity is bolstering its capacity for risk-based supervision to ensure that limited resources are utilized effectively. “We’re actually strengthening our capability to undertake risk-based supervision and as we continue to improve that capability and focus, we would be in a much better place to ensure that the limited resource that we do have are being utilised in the most effective way,” McFarlane explained.
Regulated Institutions
The FSC regulates institutions such as:
- Securities firms
- Private pensions providers
- Insurance companies
- Financial advisors
- Brokers
- Dealer representatives who interface with the public
Assessing Fitness and Propriety
To assess the fitness and propriety of licensed entities, the FSC examines factors such as:
- Governance processes
- Financial capacity
- Significant shareholders
“We have to look at what is called their fitness and propriety. We also have to assess the fitness and propriety of all directors of the company as well as that of certain senior management,” McFarlane said.
History of Success
Established in 2001, the FSC was formed to prevent a repeat of the financial sector crisis that occurred in the late 1990s. Since its inception, there has been relative success with only a few instances where extreme actions were necessary.
Focus on High-Risk Entities
Currently, the FSC supervises approximately 1,980 licensees and registrants, but not all carry the same level of risk. The executive director emphasized that the commission focuses on high-risk entities, particularly those that accept funds from the public.
Intervention Strategies
The FSC’s aim is to intervene early to prevent entity failure. “Our measures are not just in relation to a failure; they actually speak to an assessment we make on an ongoing basis as to the financial health and viability of the institutions that we regulate,” McFarlane said.
In cases where corrective action is necessary, the FSC has the authority to:
- Issue directions
- Cease and desist orders
- Take temporary management control
Collaboration with Bank of Jamaica
The FSC collaborates closely with the Bank of Jamaica, sharing information on a regular basis, including supervisory data and concerns about specific entities. “We collaborate regarding the strengthening of financial sector legislation and we also participate very actively on certain statutory committees that have been formed by policymakers to enable regulators to have a full overview of the financial stability of the sector,” McFarlane highlighted.
By enhancing its risk management capabilities, the FSC is better equipped to protect the financial stability of Jamaica’s non-deposit taking financial institutions.