On the occasion of its meeting on 10 July 2024 and on its review of the financial system’s performance and systemic risks based on data up to March 2024, the Financial Policy Committee (FPC) issues the following statement:
The financial system remained fairly stable during the March 2024 quarter. This performance was supported by positive real GDP growth and a relatively stable foreign exchange market. The Bank’s composite measure of financial stability as well as other standard measures of financial health remained within normal ranges.
However, higher than targeted inflation and the attendant elevation of interest rates pose a risk to financial institutions’ investment and credit portfolios. Financial institutions have continued to record fair value losses on their balance sheets due to the adverse effect of relatively high interest rates on their assets (bonds and equities). In addition, while the system is adequately provisioned, there is some evidence of a marginal increase in past due loans. However, the non-performing loans ratio for deposit-taking institutions (DTIs) remains below the 10.0 per cent threshold and therefore does not warrant heightened supervisory concerns.
Inflation has generally settled within the Bank of Jamaica’s target range over the three months preceding June 2024 but the risks to inflation in the future are now skewed to the upside, particularly in the short-term. The Monetary Policy Committee of the Bank also initiated a programme of monetary loosening but it noted that future monetary policy decisions will continue to depend on incoming data. Based on the foregoing, DTIs and securities dealers were subjected to market-based and credit-related stress tests. The results showed that the financial system remained largely resilient to these macrofinancial shocks.
The Bank will remain vigilant in monitoring and stress testing the credit and investment portfolios of DTIs and securities dealers to ensure that the levels of liquidity and capital are sufficient in the current environment.
Financial Policy Committee
11 July 2024
