Under the Bank of Jamaica (Amendment) Act, 2020, the mandate of Bank of Jamaica (BOJ) was revised. The amended law provides that “The principal objectives of the Bank shall be the maintenance of price stability and financial system stability with the primary objective being the maintenance of price stability.”
The law specifies that the functions of the Bank include, (a) to formulate and implement monetary policy; (b) the implementation of prudential and macro-prudential policies; (c) to issue and redeem notes and coins; (d) to hold and manage the external reserves of Jamaica; (e) to foster the development of money and capital markets in Jamaica; (f) to act as banker and financial agent of the Government; and (g) to act as banker to deposit taking institutions.
In carrying out its functions the Bank is mandated to do so with a view to achieving the principal objectives and to do so in a manner that recognizes the growth and employment objective of Government. The achievement of these two main principal objectives of the Bank is critical to the attainment of sustainable growth in the Jamaican economy, as captured in our mission statement.
The Bank of Jamaica (Amendment) Act, 2020, establishes full-fledged inflation targeting as the monetary policy strategy of the Bank. Bank of Jamaica therefore conducts monetary policy with the aim of achieving its inflation target, which is currently 4% to 6%. . Under the law, the inflation target is set by the Minister after consultation with the Governor and the Monetary Policy Committee of the Bank is mandated to formulate monetary policy to achieve this target.
In formulating monetary policy to achieve this target, the Bank takes into consideration all prevailing and prospective developments in the international economy and domestic economy. A decision to change the stance of monetary policy is reflected in changes in the Bank’s policy rate which is the rate paid on deposit taking institutions’ current account balances at the Bank.
Financial System Oversight
BOJ has supervisory and regulatory oversight of commercial banks and other licensed deposit-taking institutions. As such, it routinely monitors their compliance with all the relevant legislation and regulations to ensure the highest level of prudence and integrity in their management. The Bank’s overall responsibility for financial stability is supported by micro- and macro-prudential assessments, which are underpinned by the results from early warning systems and risk models.
The Bank also undertakes its expanded role of supervisory and financial system stability oversight in collaboration with the Financial Services Commission (FSC) and the Jamaica Deposit Insurance Corporation (JDIC) in the context of two statutory committees – the Financial System Stability Committee (FSSC) and the Financial Regulatory Committee (FRC).
In addition to the Bank’s two primary roles of Monetary Policy and Financial System Oversight, we are also responsible for:
- oversight of Jamaica’s payment, clearing and settlement systems and the foreign exchange market;
- the issue and redemption of currency;
- the provision of banking services to the Government and commercial banks as well as fiscal agency services to the Government; and
- the management of the external reserves of Jamaica.