FINANCIAL POLICY COMMITTEE’S STATEMENT ON THE 2025 FINANCIAL STABILITY REPORT
On its review of the financial system’s performance for 2025 as well as current and emerging systemic risks, the Financial Policy Committee (FPC) issue the following statement:
Notwithstanding the impact of Hurricane Melissa in late 2025, the financial system continued to demonstrate resilience. This resilience was supported by sound prudential fundamentals and a relatively stable domestic macroeconomic environment. Internationally, moderating inflation and strong impact of artificial intelligence on the stock market performance helped offset the impact of the uncertainties arising from shifting trade policies on businesses and consumers during 2025. These developments supported monetary policy easing across major advanced economies and contributed to improved market sentiment, reflected in declining bond yields, narrowing emerging market spreads, and strong gains in major equity market indices.
Domestic economic performance in 2025 was significantly affected by Hurricane Melissa, which disrupted activity across several key sectors in the last quarter of the year. Real gross domestic product is estimated to have contracted within a range of 0.5 to 1.5 per cent for the year. Despite this shock, inflation remained within the Bank’s target range, declining to 4.5 per cent at end-2025, relative to 5.0 per cent at end-2024. This outturn was supported by relative exchange rate stability and the Bank’s decision to hold the policy rate in seven out of eight policy meetings for the year. Deposit rates declined consistent with the easing policy stance, while lending rates remained relatively unchanged, reflecting structural rigidities in credit pricing. In capital markets, yields on Government of Jamaica (GOJ) Global Bonds declined. However, domestic equity indices softened amid weaker domestic economic conditions, particularly in the final quarter of 2025.
Against this background, all major financial sub-sectors maintained adequate levels of capital and liquidity buffers to manage emerging vulnerabilities throughout the year. Deposit‑taking institutions recorded broad‑based balance sheet expansion, reflecting growth in loans, investments and deposits. Capital adequacy and liquidity metrics remained comfortably above prudential thresholds despite a slight hurricane‑related uptick in non‑performing loans. Securities dealers also maintained sound financial positions, supported by improved capital adequacy and higher earnings driven by higher non‑interest income and reduced repo‑funding costs. The insurance sector played a key risk‑mitigating role, underpinned by strong reinsurance arrangements and the GOJ’s layered disaster‑risk‑financing strategy, which provided timely liquidity following Hurricane Melissa. These mechanisms helped limit fiscal pressures and contain potential spillovers to the broader financial system. Overall, robust capital positions and prudent balance sheet management supported the system’s resilience and its capacity to absorb shocks.
Throughout 2025, stress tests were undertaken to evaluate the capacity of financial institutions to withstand macro-financial shocks. The results indicate that the system remains generally resilient to the contemplated shocks. Adequate capital and liquidity buffers continue to provide meaningful loss‑absorption capacity, supporting system‑wide stability even as new risks emerge.
The financial sector is expected to continue to face evolving risks, including climate-related financial risks, cyber threats and increased geopolitical uncertainty. The resurgence of conflict in the Middle East on 28 February 2026 has heightened concerns about global supply chain disruptions and upward pressures on commodity prices. Since the outbreak of the conflict, several major central banks including the Federal Reserve have paused anticipated policy rate reductions as inflation risks have intensified. At the same time, bond prices, particularly for longer‑duration securities, have declined amid rising yields.
In this context, financial-sector supervisors remain committed to strengthening risk-mitigation frameworks and advancing priority reforms. Accordingly, progress continues on enhancing collaborative supervision ahead of the full implementation of the Twin Peaks framework. Work is also advancing on key reforms including Basel III standards, the Special Resolution Regime, and ongoing engagement with the financial industry on cyber-risk standards and guidelines. Collectively, these proactive policy initiatives, supported by strong institutional structures and coordinated efforts among members of the Financial System Safety Net will help mitigate risks and enhance systemic resilience.
The report is available at https://boj.org.jm/publications”
Financial Policy Committee
30 March 2026
