FINANCIAL POLICY COMMITTEE’S STATEMENT ON THE
2024 FINANCIAL STABILITY REPORT
On its review of the financial system’s performance for 2024 as well as current and emerging risks, the Financial Policy Committee (FPC) issues the following statement:
In 2024, several economic developments had positive implications for the domestic financial system. Globally, inflation fell, allowing central banks in major developing countries to ease monetary conditions through their policy actions. Bond yields, including those related to Government of Jamaica (GOJ) Eurobonds, did not respond significantly and fluctuated in a narrow range. However, stock markets in major developed economies responded with marginal improvements. Domestically, annual inflation also declined, returning to the Bank’s target range for most of the year. In response to the favourable inflation development, along with a positive inflation outlook, BOJ reduced its policy rate on four occasions by a total of 100 basis points, ending the year at 6.0 per cent. The real economy grew by 0.8 per cent for the first half of 2024 before the impact of Hurricane Beryl and other weather events induced an estimated decline of 2.5 per cent in economic activity for the second half. The external accounts of the economy remained in surplus for 2024, which contributed to the stability of the foreign exchange market and a build-up in the Bank’s gross foreign assets. These external developments underscored the reduction in exchange rate risk faced by the financial sector and, by extension, the real economy.
In the context of these developments, the Jamaican financial markets remained generally stable during 2024. The domestic stock market showed a modest improvement relative to the prior year. Similarly, the foreign exchange and bond markets exhibited relative stability, with bond yields fluctuating within a narrow range.
Deposit-taking institutions (DTIs) reported asset growth for the year, albeit at a slower pace than the previous year. This performance was primarily driven by a slowdown in loan growth, as they tightened credit conditions, and a reduction in the size of their investment portfolio. Profitability of the DTIs declined mainly due to higher operating expenses. Despite this, DTIs maintained strong capital, asset quality and liquidity positions. Similarly, the securities dealers (SDs), and the insurance sectors, maintained capital and liquidity levels well above their regulatory requirements despite facing constrained profitability.
The financial system is facing evolving risks, including climate-related financial risks and cyber risks. There is also some risk to financial stability from policy uncertainty in the United States and heightened geopolitical tensions. The latter risk could lead to a pause or reversal in the monetary policy stance in major economies and, potentially, in Jamaica.
To assess potential vulnerabilities within the financial system, stress tests were conducted to evaluate the resilience of DTIs and SDs to significant macro-financial shocks. The results indicate that the system remained generally resilient to the contemplated shocks.
In the context of the risks mentioned above, the Bank has implemented, or is in the process of implementing, measures to assess, mitigate and respond to these challenges. Key policy initiatives include: (i) ongoing work to fully implement and operationalise the Basel III supervisory framework; (ii) led the preparation of the Financial Institutions Resolution and Winding-Up Bill, which was tabled in Parliament in June 2024; (iii) the continued refinement of a framework for consolidated supervision; and (iv) ongoing engagement with the financial industry on standards and guidelines for addressing cyber risks and climate related-financial risks. Furthermore, throughout the year, BOJ and the Financial Services Commission (FSC) commenced joint prudential and market conduct examinations under the Twin Peaks Practicing initiative. Plans are also in place for continuous training and capacity building for BOJ and FSC employees to ensure a smooth transition towards Twin Peaks Supervision.
The report is available at https://boj.org.jm/boj-publications/annual-publications/
Financial Policy Committee
31 March 2025
