ANNUAL REPORT
2004
Report and Statement of Accounts for the Year Ended 31 December 2004
Mission Statement
The mission of the Bank of Jamaica is to formulate and implement monetary and regulatory policies to safeguard the value of the domestic currency and to ensure the soundness and development of the financial system by being a strong and efficient organisation with highly motivated and professional employees working for the benefit of the people of Jamaica.
BANK OF JAMAICA NETHERSOLE PLACE KINGSTON
31 March 2005
Dr. The Hon. Omar Davies Minister of Finance & Planning National Heroes Circle Kingston 4
Dear Minister:
In accordance with Section 44 (1) of the Bank of Jamaica Act, 1960, I have the honour of transmitting herewith the Bank’s Report for the year 2004 and a copy of the Statement of the Bank’s Accounts as at 31 December 2004 duly certified by the Auditors.
Yours sincerely,
Derick Latibeaudiere Governor
PRINCIPAL OFFICERS
GOVERNOR Mr. Derick Latibeaudiere
DEPUTY GOVERNORS 1. Mrs. Audrey Anderson - Financial Institutions Supervisory Division
2. Mr. Colin Bullock - Research & Economic Programming Division Banking & Market Operations Division
3. Mr. Rudolph Muir - General Counsel & Bank Secretary, Corporate Secretary’s Division
GENERAL MANAGER Mr. Kenloy Peart
DIVISION CHIEFS 1. Mrs. Myrtle Halsall - Research & Economic Programming Division
2. Mrs. Gayon Hosin - Financial Institutions Supervisory Division
3. Mr. Herbert Hylton - Finance & Technology
4. Mrs. Faith Stewart - Financial Services Sub-Division Banking & Market Operations Division
SENIOR DIRECTORS 1. Mr. Randolph Dandy - Senior Legal Counsel Legal Department
2. Mrs. Natalie Haynes - Senior Director Financial Markets Sub-Division Banking & Market Operations Division
3. Mrs. Evadnie Sterling - Chief Internal Auditor Internal Audit Department
BOARD OF DIRECTORS
THE HON. DERICK LATIBEAUDIERE, O.J. Governor & Chairman
COLIN BULLOCK
CHRISTOPHER BICKNELL
THE HON. CARLTON DAVIS, O.J., C.D.
KENNETH HALL
ROSALEA HAMILTON
JEFFREY PYNE
THE HON. SHIRLEY TYNDALL, O.J., C.D.
CONTENTS
1. Overview 1
2. The Financial System 5 2.1. Monetary Policy Management 6 2.2. Monetary Survey 9
2.3. Commercial Banks 12
2.4. Other Financial Intermediaries 23 2.4.1. Financial Institutions Act Licensees 23 2.4.2. Building Societies 26 2.5. Development Banks 29 2.5.1. Development Bank of Jamaica 29 2.5.2. National Export Import Bank of Jamaica 31
3 Financial Market Operations 34 4 Supervision of Deposit-Taking Financial Institutions 40 5 The Stock Market 60 6 External Sector Developments 65 6.1. International Economic Developments 65 6.2. Balance of Payments 73 6.3. Foreign Exchange Management 83 6.3.1. Bank of Jamaica International Reserves 83 6.3.2. Reserve Management 86
6.3.3. The Foreign Exchange Market 89 6.3.4. Cambio licencing and Monitoring 91 6.3.5. Remittance Licencing and Monitoring 92
7. Production and Prices 94 7.1. Production 94
7.2. Prices 99 8. Banking and Currency Operations 107 8.1. Banking Services 107 8.2. Payment System Developments 107 8.3. Currency Operations 109 9. Financial Legislation 112 10. Administration 117
11. Compensation of Executive Management 119
12. Calendar of Monetary Policy Developments 120
Final Accounts for the Year Ended 31 December 2004 1. Overview
he generally stable macroeconomic VKRFNWRKHDGOLQHLQÀDWLRQLQWKHODWWHUKDOIRIWKH\HDU,Q environment that prevailed during 2004 WKLVUHJDUGFRUHLQÀDWLRQVORZHGWRSHUFHQWLQ Tallowed the Bank of Jamaica to relax its FRPSDUHGWRSHUFHQWLQ7KHXSWXUQLQKHDGOLQH monetary policy stance while maintaining its focus LQÀDWLRQZDVDGLUHFWUHVXOWRIWKHHIIHFWRIDQLQFUHDVH RQSUHVHUYLQJORZLQÀDWLRQ7KHHDVLQJRISROLF\ZDV LQZRUOGRLOSULFHVDVZHOODVDWURSLFDOVWRUPLQ$XJXVW effected through a series of reductions in the Bank’s DQG KXUULFDQH LQ 6HSWHPEHU ZKLFK VHYHUHO\ UHGXFHG LQWHUHVWUDWHVWUXFWXUH7KHPRUHVWDEOHHQYLURQPHQWLQ DJULFXOWXUDOVXSSO\DQGLQFUHDVHGUHODWHGSULFHV)RUWKH 2004 followed a period of economic challenges faced -DQXDU\WR6HSWHPEHUSHULRGWKHFRQVXPHUSULFHLQGH[ by the Bank during 2003 that had required a resolute LQFUHDVHG E\ SHU FHQW DYHUDJLQJ SHU FHQW SHU WLJKWHQLQJ RI PRQHWDU\ SROLF\ %\ FRQWUDVW PDUNHW TXDUWHU+RZHYHULQWKH2FWREHUWR'HFHPEHUTXDUWHU FRQGLWLRQV WKURXJKRXW UHÀHFWHG WKH UHVWRUDWLRQ WKHVSLNHLQIRRGSULFHVFRQWULEXWHGWRLQÀDWLRQRI RI VWURQJ IRUHLJQ DQG ORFDO LQYHVWRU FRQ¿GHQFH ZLWK SHUFHQWZKLFKZDVPXFKKLJKHUWKDQWKHSHUFHQW RSWLPLVPIXHOOHGE\IRUHLJQH[FKDQJHPDUNHWVWDELOLW\ DYHUDJHLQFUHDVHH[SHULHQFHGLQWKH'HFHPEHUTXDUWHU the accumulation of foreign reserves and the expansion RYHUWKHSDVW¿YH\HDUV1RQHWKHOHVVLQÀDWLRQIRU RI HFRQRPLF RXWSXW7KHVH WUHQGV ZHUH UHLQIRUFHG E\ ZDVSHUFHQWH[KLELWLQJDPRGHVWGRZQWXUQZKHQ the Government’s stated commitment to attaining the FRPSDUHGWRWKHUDWHRISHUFHQWLQ ¿VFDOWDUJHWV
$QDGHTXDWHVXSSO\RIIRUHLJQH[FKDQJHIURPWRXULVW (DUO\LQWKH\HDUWKH*RYHUQPHQWDQGWKH,QWHUQDWLRQDO H[SHQGLWXUH SULYDWH UHPLWWDQFHV DQG RI¿FLDO LQÀRZV Monetary Fund agreed to enter into a non-borrowing facilitated stability in the foreign exchange market and UHODWLRQVKLS WR EH WHUPHG DQ ,QWHQVL¿HG 6XUYHLOODQFH DEXLOGXSLQWKH1,57KLVVWDELOLW\ZDVUHÀHFWHGLQD 3URJUDPPH ,63 $QQXDODQGVHPLDQQXDOSHUIRUPDQFH PHUHSHUFHQWGHSUHFLDWLRQLQWKHIRUHLJQH[FKDQJH WDUJHWVLQWKHUHDOH[WHUQDOPRQHWDU\DQG¿VFDOVHFWRUV UDWH WKH ORZHVW VLQFH ZKHQ WKH -DPDLFD 'ROODU were set as the macroeconomic indicators that would UHFRUGHGGHSUHFLDWLRQRISHUFHQW7KHVHIDFWRUV EHPRQLWRUHGFORVHO\E\WKH)XQG7KHVHWDUJHWVZHUH FRXSOHGZLWKLPSURYHG¿VFDOSHUIRUPDQFHWKURXJKRXW consistent with the Government’s economic objectives WKH\HDUKHOSHGWREXR\LQYHVWRUFRQ¿GHQFH RIDUHGXFWLRQLQWKHGHEWEXUGHQLQÀDWLRQPRGHUDWLRQ DQGJURZWK,QWKLV,63WKH%DQNGHYHORSHGDPRQHWDU\ 6XSSRUWHGE\WKHUHVWRUDWLRQRIPDUNHWFRQ¿GHQFHDQGD programme incorporating quarterly benchmarks for GRZQZDUGWUHQGLQLQÀDWLRQWKH%DQNZDVDEOHWRORZHU monetary expansion and the quantum of credit that the interest rates on its open-market instruments on nine would be consistent with the main target of monetary RFFDVLRQVLQWKH-DQXDU\WR-XQHSHULRGZKLOHPDQDJLQJ SROLF\WKHLQÀDWLRQUDWH EDVHPRQH\ WKHPDLQRSHUDWLQJWDUJHWRISROLF\ ZLWKLQ
&RUH RU XQGHUO\LQJ LQÀDWLRQ FRQWLQXHG WR WUHQG SURJUDPPHGOHYHOV5DWHVRQWKHGD\DQGGD\ downwards in line with the policy objective despite a
1 Bank of Jamaica
LQVWUXPHQWVZHUHUHGXFHGE\ SHUFHQWDJHSRLQWVDQG SHUFHQWLQUHSUHVHQWLQJWKHVL[WKFRQVHFXWLYH SHUFHQWDJHSRLQWVUHVSHFWLYHO\7KHLPSURYHPHQW \HDURISRVLWLYHJURZWK7KHJURZWKLPSHWXVHPDQDWHG LQPDUNHWFRQ¿GHQFHZDVHYLGHQWLQDSUHIHUHQFHIRUWKH IURP VHUYLFHV ZKLFK DFFRXQWHG IRU SHU FHQW RI -DPDLFD'ROODUZKLFKZDVUHÀHFWHGLQWKHFRQYHUVLRQRI WKH LQFUHDVH LQ UHDO *URVV 'RPHVWLF 3URGXFW *'3 86GROODUVIRULQYHVWPHQWLQORFDOFXUUHQF\LQVWUXPHQWV Distributive trade and miscellaneous services were ,QWHUHVWLQ-DPDLFD'ROODUEDQNGHSRVLWVDQGHTXLWLHVZDV WKHPDLQDUHDVRIJURZWKLQVHUYLFHV7KHUHZDVPXFK further heightened by the Government’s net redemption activity in the distribution of food and relief supplies RIGRPHVWLFGHEWLQVWUXPHQWV$IWHUGHFOLQLQJE\ LQ WKH DIWHUPDWK RI WKH 6HSWHPEHU +XUULFDQH ZKLFK SHUFHQWLQGRPHVWLFFXUUHQF\GHSRVLWVLQFUHDVHG LQÀXHQFHGDSHUFHQWJURZWKLQdistributive trade. E\SHUFHQWLQZKLOHIRUHLJQFXUUHQF\GHSRVLW *LYHQLWVZHLJKWLQ-DPDLFD¶V*'3WKHVHFWRUZDVWKH JURZWKVORZHGWRSHUFHQWFRPSDUHGWRSHU fourth largest contributor to economic expansion in FHQWLQ 7KH SHUIRUPDQFH LQ WKH WRXULVW LQGXVWU\ ZDV D VWURQJLQÀXHQFHRQWKHHVWLPDWHGSHUFHQWH[SDQVLRQ Monetary policy management in the latter half of the year in the value added in miscellaneous services. Tourism IDFHGFKDOOHQJHVRFFDVLRQHGE\WKHLQÀDWLRQDU\HIIHFWV H[SDQGHGGHVSLWHWKHGDPDJHRIWKH+XUULFDQHWRWRXULVW of rising oil prices and reduced supplies of agricultural infrastructure and visitor expenditure is estimated to FRPPRGLWLHV,QDGGLWLRQSRVWKXUULFDQHH[SHQGLWXUH KDYHLQFUHDVHGE\SHUFHQWLQ compounded the seasonal increase in liquidity in the 'HFHPEHUTXDUWHU$FFRUGLQJO\WKH%DQNUHGXFHGWKH The improved performance of Jamaica’s economy magnitude and frequency of interest rate reductions LQZDVVHWDJDLQVWWKHEDFNJURXQGRIVLJQL¿FDQW to protect the stability gained in the foreign exchange DGYDQFHVLQJOREDOHFRQRPLFDFWLYLW\7KHVWURQJJURZWK PDUNHW HDUOLHU LQ WKH \HDU DQG WR OLPLW LQÀDWLRQDU\ recorded for the industrialized and developing countries LPSXOVHV 'HVSLWH WKH FKDOOHQJHV WKH %DQN ZDV DEOH LQÀXHQFHG WKH VWUHQJWKHQLQJ RI -DPDLFD¶V EDODQFH to manage liquidity through open market operations at RI SD\PHQWV SRVLWLRQ GHVSLWH WKH HIIHFW RI H[WUHPH SURJUHVVLYHO\ORZHULQWHUHVWUDWHV weather conditions on the major foreign exchange HDUQLQJ VHFWRUV *URZWK LQ WKH ZRUOG HFRQRP\ KDG D 7KHSDFHRIHFRQRPLFDFWLYLW\DFFHOHUDWHGLQWKH¿UVW SRVLWLYHLPSDFWRQDOXPLQDH[SRUWVWRXULVPDQGSULYDWH KDOIRIWKH\HDU,QWKHPDLQexport agriculture grew WUDQVIHUV ,Q WKLV FRQWH[W WKH FXUUHQW DFFRXQW GH¿FLW E\ SHU FHQW manufacturing E\ SHU FHQW DQG LPSURYHGE\86PLOOLRQWR86 PLOOLRQ electricity and waterSHUFHQW +RZHYHUKXUULFDQH SHUFHQWRI*'31HWLQYHVWPHQWLQÀRZVIURPSULYDWH GDPDJH LQ 6HSWHPEHU KDG DQ DGYHUVH LPSDFW RQ DQGRI¿FLDOVRXUFHVDGGHGWRDFDSLWDODFFRXQWVXUSOXV SURGXFWLRQ ODWHU LQ WKH \HDU Export agriculture and ZHUHPRUHWKDQVXI¿FLHQWWR¿QDQFHWKHGH¿FLWRQWKH electricity and water are estimated to have declined FXUUHQWDFFRXQW E\SHUFHQWDQGSHUFHQWUHVSHFWLYHO\ZKLOH growth in manufacturingVORZHGWRSHUFHQWLQWKH 7KH RI¿FLDO QHW LQWHUQDWLRQDO UHVHUYHV VWRRG DW 86 ODWWHU KDOI RI 1RWZLWKVWDQGLQJ WKHVH UHYHUVDOV PLOOLRQDVDW'HFHPEHUDQLQFUHDVHRI the Jamaican economy is estimated to have grown by 86 PLOOLRQIRUWKH\HDU$VFXVWRGLDQRI-DPDLFD¶V
Overview 2 Annual Report 2004
IRUHLJQUHVHUYHVWKH%DQNFRQWLQXHGWRLQYHVWIRUHLJQ steadily improve well within the prudential tolerance assets consistent with its strict policy guidelines of OLPLW RI SHU FHQW 3UR¿WDELOLW\ RI WKH V\VWHP investing exclusively in high quality investment-grade GHFOLQHGPDUJLQDOO\LQLQWKHFRQWH[WRIGHFOLQLQJ LQVWUXPHQWV 7KHVH LQFOXGHG 8QLWHG 6WDWHV $JHQF\ LQWHUHVWUDWHVDQGVWDELOLW\LQWKHIRUHLJQH[FKDQJHUDWH %RQGV DQG (XURGROODU GHSRVLWV ZKLFK HDUQHG PRUH 7KLVZDVUHÀHFWHGLQDUHGXFHGSUHWD[SUR¿WPDUJLQDQG WKDQKDOIRIWKH86PLOOLRQLQIRUHLJQLQYHVWPHQW UHWXUQRQDVVHWVLQRISHUFHQWDQGSHUFHQW LQFRPHIRU UHVSHFWLYHO\FRPSDUHGWRSHUFHQWDQGSHUFHQW LQ7KHFDSLWDOEDVHRIWKHV\VWHPJUHZDWDIDVWHU Macroeconomic stability in the year shaped investor UDWHDJDLQVWWRWDODVVHWEDVH&DSLWDODGHTXDF\WKHUHIRUH H[SHFWDWLRQVRIIDYRXUDEOHHDUQLQJVIURPFRPSDQLHV$V HGJHGXSWRSHUFHQWDW'HFHPEHUIURP VXFKWKH-DPDLFDVWRFNPDUNHWLQUHFRUGHGRQH SHUFHQWLQ7KLVFRYHUDJHZDVSHUFHQWDJH RI LWV VWURQJHVW FDOHQGDU \HDU SHUIRUPDQFHV UHÀHFWLQJ SRLQWVDERYHWKHSUXGHQWLDOEHQFKPDUNRISHUFHQW JURZWKRISHUFHQWLQLWVPDLQLQGH[7KHIDOOLQJ rates on money market instruments as well as the The Bank continued to play a vital role in the extended period of exchange rate stability would have GHYHORSPHQWDQGH[HFXWLRQRIWKHQDWLRQDO$QWL0RQH\ DXJXUHGZHOOIRUWKHJURZWKRIWKHHTXLWLHVPDUNHW Laundering and Combating the Financing of Terrorism $0/&)7 IUDPHZRUN 7KURXJK LWV OHDGHUVKLS D With regard to the Bank’s supervision of deposit- FRPSUHKHQVLYH UHYLVLRQ RI WKH ¿QDQFLDO OHJLVODWLYH WDNLQJ¿QDQFLDOLQVWLWXWLRQVVXSHUYLVRU\PHWKRGRORJ\ IUDPHZRUNDQGUHODWHGUHJXODWLRQVFRQWLQXHGLQ continued to be upgraded and reshaped to adapt to The Bank became involved in a newly formed national the increased complexities in banking operations and Financial Crimes Legislative Task Force whose work GHYHORSPHQWVLQLQWHUQDWLRQDOVXSHUYLVRU\VWDQGDUGV,Q has resulted in legislative amendments being passed by VXSHUYLVRU\SROLF\FRQWLQXHGWRIRFXVRQDFKLHYLQJ 3DUOLDPHQWLQ7KHDPHQGHGOHJLVODWLRQLQFOXGHG full compliance with the Basel Core Principles for WKH%DQNRI-DPDLFD$FWWKH%DQNLQJ$FWWKH)LQDQFLDO (IIHFWLYH%DQNLQJ6XSHUYLVLRQDVZHOODVRWKHUUHODWHG ,QVWLWXWLRQV$FWWKH%XLOGLQJ6RFLHWLHV5HJXODWLRQVDQG LQWHUQDWLRQDO VWDQGDUGV 2IIVLWH VXUYHLOODQFH DQG RQ WKH)LQDQFLDO6HUYLFHV&RPPLVVLRQ$FW,QDGGLWLRQWR site examination revealed a general improvement in the WKHGHSRVLWWDNLQJ¿QDQFLDOLQVWLWXWLRQVWKHOHJLVODWLYH SHUIRUPDQFHRIWKHVXSHUYLVHGV\VWHP7KHDVVHWSUR¿OH DPHQGPHQWVKDGDQLPSDFWRQFDPELRVLQWKHLUUROHDV continued to be dominated by investments accounting UHJXODWHGIRUHLJQH[FKDQJHWUDGHUVDQGRQFRPSDQLHV IRUSHUFHQWRIWRWDODVVHWVZKLOHWKHVWRFNRIORDQV RIIHULQJUHPLWWDQFHVHUYLFHV,QWKHVHLQVWLWXWLRQV UHSUHVHQWHG SHU FHQW 7KH FRPPHUFLDO EDQNLQJ were sensitized to the money laundering legislation and VHFWRU FRQWLQXHG WR EH D SUHGRPLQDQW LQÀXHQFH RQ CFT techniques through the issuance of revised Bank of V\VWHPWUHQGVDFFRXQWLQJIRUSHUFHQWRIWKHJURZWK -DPDLFDRSHUDWLQJJXLGHOLQHV LQDVVHWVDQGFRQWUROOLQJSHUFHQWRIWKHV\VWHP¶V DVVHWVDVDW'HFHPEHU7KHDVVHWTXDOLW\RIWKH ,Q RUGHU WR HIIHFWLYHO\ IXO¿OO LWV VWDWHG PLVVLRQ WKH GHSRVLWWDNLQJV\VWHPDVPHDVXUHGE\WKHSURSRUWLRQ Bank continued to invest in specialized training and RI QRQSHUIRUPLQJ ORDQV WR WRWDO ORDQV FRQWLQXHG WR GHYHORSPHQWSURJUDPPHVIRUVWDII7KHVHSURJUDPPHV
Overview 3 Bank of Jamaica provided training in areas such as international best SUDFWLFHV LQ ¿QDQFLDO VXSHUYLVLRQ QHZ DSSURDFKHV LQ ¿QDQFLDO DVVHVVPHQW DQG DQDO\VLV HFRQRPLF SROLF\ IRUPXODWLRQ DQG PDQDJHPHQW DV ZHOO DV SODQW PDQDJHPHQWDQGPDLQWHQDQFH7KH%DQNHPSOR\HG SHUPDQHQW RI¿FHUV GXULQJ WKH \HDU EULQJLQJ WKH VWDII FRPSOHPHQWWRDVDW'HFHPEHU
,Q WKH %DQN RI -DPDLFD ZLOO FRQWLQXH WR formulate appropriate monetary and regulatory polices WR IDFLOLWDWH FRQWLQXHG PDUNHW VWDELOLW\ DQG ¿QDQFLDO V\VWHPVRXQGQHVV7KHPDFURHFRQRPLFLQGLFDWRUVQRZ SRLQWWRWKHDWWDLQPHQWRIVLQJOHGLJLWLQÀDWLRQLQ ZKLOHWKH1,5OHYHOLVH[SHFWHGWRUHPDLQDGHTXDWHWR XQGHUZULWHQHDUWHUPVWDELOLW\7KH-DPDLFDQHFRQRP\ LVSURMHFWHGWRH[SDQGE\SHUFHQWWRSHUFHQWLQ LQWKHFRQWH[WRIVWDELOLW\DWKRPHDQGDIDYRXUDEOH HQYLURQPHQWLQWKHZRUOGHFRQRP\
Overview 4 2. The Financial System
2.1. Monetary Policy Management H[WHUQDO WR WKH -DPDLFDQ ¿QDQFLDO V\VWHP ,QVWDELOLW\ 2.1.1. Introduction LQ WKH IRUHLJQ H[FKDQJH PDUNHW LQ -XQH DQG -XO\ onetary policy during 2004 was which coincided with the Government not re-issuing conducted in the context of a favourable DPDWXULQJ86GROODULQGH[HGERQGSURPSWHGWKHVDOH Mmacroeconomic environment and of foreign exchange by the Bank to stabilize market LPSURYHGLQYHVWRUFRQ¿GHQFHZKLFKHQDEOHGWKH%DQN FRQGLWLRQV ,QÀDWLRQDU\ SUHVVXUHV IURP D VXVWDLQHG RI -DPDLFD %2- WR VWHDGLO\ UHGXFH LQWHUHVW UDWHV rise in global oil prices threatened the attainment of 'HVSLWHWKHVKRFNWRVRPHFRPPRGLW\SULFHVWRZDUGV WKHLQÀDWLRQREMHFWLYH0RUHRYHUJLYHQWKHWHPSRUDU\ WKHHQGRIWKH\HDUFRUHLQÀDWLRQGHFOLQHGWRSHU disruption in economic activity due to hurricanes in FHQWGRZQIURPSHUFHQWLQ $XJXVW DQG 6HSWHPEHU DQG WKH UHVXOWDQW LQÀDWLRQDU\ impact primarily from the shortfall in agricultural 2.1.2. Developments and Challenges VXSSOLHVWKH%2-DGRSWHGDPRUHFDXWLRXVDSSURDFKWR PRQHWDU\SROLF\+HQFHLQWHUHVWUDWHUHGXFWLRQVZHUH The conduct of monetary policy in 2004 supported the HIIHFWHGRQO\WZLFHLQWKHODWWHUKDOIRIWKH\HDUUHODWLYH UHVWRUDWLRQ RI FRQ¿GHQFH LQ WKH -DPDLFDQ HFRQRP\ WRWKHQLQHRFFDVLRQVEHWZHHQ-DQXDU\DQG-XQH 2SWLPLVPZDVIXHOOHGE\JURZWKLQNH\IRUHLJQH[FKDQJH HDUQLQJVHFWRUVVXFKDVPLQLQJDQGWRXULVPDVZHOODV WKH *RYHUQPHQW¶V FRPPLWPHQW WR PHHWLQJ LWV ¿VFDO 'HVSLWH WKH FKDOOHQJHV WR PRQHWDU\ SROLF\ LQ WKH WDUJHWV7KHUHWXUQRILQYHVWRUFRQ¿GHQFHIDFLOLWDWHGWKH VHFRQGKDOIRIWKH\HDUWKHRXWWXUQIRUEDVHPRQH\IHOO within the indicative programme target for 2004 (see *RYHUQPHQWVRXUFLQJDWRWDORI86PLOOLRQIURP Table 1a LQWHUQDWLRQDO¿QDQFLDOPDUNHWVLQ$EXLOGXSLQ 7KH1,5VWRFNVXUSDVVHGWKHSURJUDPPHG WKHVWRFNRI1HW,QWHUQDWLRQDO5HVHUYHV 1,5 ODUJHO\ WDUJHWE\86PLOOLRQWRFORVHWKH\HDUDW86 attributable to direct purchases of foreign exchange PLOOLRQ7KH-DPDLFD'ROODUOLTXLGLW\LPSDFWRI IURP SULYDWH FDSLWDO LQÀRZV VWUHQJWKHQHG WKH DELOLW\ WKH KLJKHU 1,5 ZDV SULPDULO\ RIIVHW E\ DQ H[SDQVLRQ RIWKH%2-WRGHIHQGWKHYDOXHRIWKH-DPDLFD'ROODU LQ RSHQPDUNHW RSHUDWLRQV ZKLFK EURXJKW WKH 1HW 0RUHRYHUWKHUHODWLYHO\VWDEOHFRQGLWLRQVLQWKHIRUHLJQ 'RPHVWLF$VVHWV 1'$ ZHOO EHORZ WKH SURJUDPPHG exchange and domestic money markets permitted the FHLOLQJ %2-WRVLJQL¿FDQWO\UHGXFHLQWHUHVWUDWHVRQLWVRSHQ PDUNHWLQVWUXPHQWVSDUWLFXODUO\LQWKH¿UVWKDOIRIWKH )RUWKHPRQHWDU\EDVHLQFUHDVHGE\SHUFHQW \HDU UHODWLYHWRSHUFHQWLQ see Table 1b 7KH H[SDQVLRQUHÀHFWHGDQLQFUHDVHLQWKHVWRFNRIFXUUHQF\ The latter half of 2004 presented greater challenges for ZKLFKJUHZE\SHUFHQWUHODWLYHWRSHUFHQWLQ the conduct of monetary policy due to several shocks
Bank of Jamaica
WKHSUHYLRXV\HDU,QDGGLWLRQWKHSHUFHQWLQFUHDVHLQ 2.1.4 July to December FRPPHUFLDOEDQNVWDWXWRU\UHVHUYHVZDVUHÀHFWLYHRIKLJKHU SULYDWHVHFWRUGHSRVLWVLQWKHEDQNLQJVHFWRU 7KHPRQHWDU\EDVHH[SDQGHGE\SHUFHQWGXULQJWKH VHFRQGKDOIRIWKH\HDU7KLVH[SDQVLRQZDVUHÀHFWHGPDLQO\ 2.1.3. January to June in net currency issues attributable to post-hurricane related H[SHQGLWXUH LQ DGGLWLRQ WR WKH XVXDO VHDVRQDO LQFUHDVH 'XULQJWKH¿UVWKDOIRIWKH\HDUWKHPRQHWDU\EDVHGHFOLQHG GXULQJ 'HFHPEHU7KH PDMRU VRXUFH RI WKH JURZWK LQ WKH E\ SHUFHQWSULPDULO\UHÀHFWLQJDSHUFHQWGHFOLQHLQ PRQHWDU\EDVHZDVWKHLQFUHDVHLQWKH1,5RI86 WKH0DUFKTXDUWHU7KLVGHFOLQHLQWKH¿UVWTXDUWHUUHÀHFWHG PLOOLRQ )RUHLJQ FXUUHQF\ LQÀRZV HPDQDWHG ODUJHO\ IURP the impact of the seasonal redemption of currency from (XURERQG UHFHLSWV RI ¼ 86 PLOOLRQ LQ -XO\ WKHEDQNLQJV\VWHP7KHPDMRUFRXQWHUSDUWWRWKHGHFUHDVH DQGDQHDUOLHUWKDQDQWLFLSDWHG¼ 86 PLOOLRQ LQEDVHPRQH\IRUWKH¿UVWVL[PRQWKVRIWKH\HDUZDVDQ LQ 2FWREHU 6RPH RI WKHVH IRUHLJQ UHFHLSWV ZHUH XVHG WR LQFUHDVH RI PLOOLRQ LQ RSHQ PDUNHW RSHUDWLRQV DPRUWL]H *2- H[WHUQDO GHEW LQFOXGLQJ D (XURERQG WKDW 202 7KH LQFUHDVHG OHYHO RI 202 DFWLYLW\ RIIVHW WKH PDWXUHGLQ$XJXVW5HPDLQLQJH[FHVVOLTXLGLW\ZDVRIIVHW OLTXLGLW\ LPSDFW RI WKH EXLOG XS LQ WKH 1,5 7KH %DQN¶V WKURXJKDSHUFHQWLQFUHDVHLQRSHQPDUNHWRSHUDWLRQVLQ SXUFKDVH RI (XURERQG UHFHLSWV RI ¼ 86 WKHODVWWZRTXDUWHUVRIWKH\HDU PLOOLRQ DQG 86 PLOOLRQ IURP WKH *RYHUQPHQW LQ )HEUXDU\DQG$SULOUHVSHFWLYHO\FRQWULEXWHGWRWKHLQFUHDVH :LWKWKHSDVVDJHRI7URSLFDO6WRUP&KDUOH\DQG+XUULFDQH RI86 PLOOLRQLQWKH1,5EHWZHHQ-DQXDU\DQG-XQH ,YDQ LQ $XJXVW DQG 6HSWHPEHU UHVSHFWLYHO\ DV ZHOO DV LQÀDWLRQDU\ SUHVVXUHV IURP ULVLQJ RLO SULFHV WKH %DQN 7KH DGHTXDWH VXSSO\ RI IRUHLJQ FXUUHQF\ LQÀRZV DQG acted more cautiously in loosening monetary policy in the improving macroeconomic conditions facilitated stability in VHFRQGKDOIRIWKH\HDU,QWKLVFRQWH[WRQO\RQHLQWHUHVWUDWH WKHGRPHVWLFPRQH\DQGIRUHLJQH[FKDQJHPDUNHWV7KHVH UHGXFWLRQZDVFDUULHGRXWLQWKH6HSWHPEHUTXDUWHU0RGHVW favourable conditions allowed the Bank to aggressively ease UHGXFWLRQVRIWREDVLVSRLQWVZHUHPDGHRQ%2-¶V PRQHWDU\SROLF\LQWKH¿UVWKDOIRIWKH\HDU%HWZHHQ-DQXDU\ GD\WRGD\LQVWUXPHQWVRQ6HSWHPEHU see Table 2 and June there were nine interest rate reductions across the 5DWHVZHUHKHOGDWWKDWOHYHOIRUPRVWRIWKHUHPDLQGHURIWKH HQWLUH VSHFWUXP RI %2- RSHQPDUNHW LQVWUXPHQWV $V DW \HDU+RZHYHUVXVWDLQHGRSWLPLVPLQWKH-DPDLFDQHFRQRP\ end June the interest rate offered on the 30-day instrument due to timely recovery of key sectors in the aftermath of ZDVEDVLVSRLQWVEHORZWKDWDWHQG'HFHPEHU see WKHKXUULFDQHVLQDGGLWLRQWRHYLGHQFHRIWKH*RYHUQPHQW¶V Table 2 (YHQPRUHVLJQL¿FDQWZDVWKHVKDUSGHFOLQHRQ DGKHUHQFHWR¿VFDOSUXGHQFHFUHDWHGFRQGLWLRQVIRUDIXUWKHU WKH GD\ GD\ DQG GD\ VHFXULWLHV RI UHGXFWLRQLQLQWHUHVWUDWHV2Q'HFHPEHUWKH%DQNFXW DQG EDVLV SRLQWV UHÀHFWLQJ UHPRYDO RI WKH UHODWLYHO\ 202UDWHVDFURVVDOOWHQRUVUHVXOWLQJLQFXPXODWLYHGHFOLQH high premium offered on longer tenors (see Chart 1 RIEDVLVSRLQWVRQWKHGD\LQVWUXPHQWIRU
The Financial System 6 Annual Report 2004
Table 1a
BANK OF JAMAICA-ECONOMIC PROGRAMME TARGETS STOCKS J$M December 2004 TARGET OUT-TURN DEVIATION FROM TARGET Net International Reserves (US$)
NET INT’L RESERVES (J$)
NET DOMESTIC ASSETS
MONETARY BASE
The Financial System Bank of Jamaica
Table 1b BANK OF JAMAICA- SUMMARY FLOWS J$M 2003 2004 2004 Total Jan- Mar Apr- Jun Jul- Sept Oct-Dec Total
Net International Reserves (US$) -432.0 403.7 35.4 12.4 242.0 693.5 NET INT’L RESERVES (J$) -22810.7 24584.1 2158.3 770.0 15004.0 42516.4 $VVHWV 42029.8 -Liabilities 486.6
NET DOMESTIC ASSETS 27579.2 -28924.0 -1731.7 1007.9 -8339.3 -37987.1 Net Claims on Public Sector 27783.5 -2364.2 12999.0 7999.4 -5815.1 12819.1 &HQWUDO*RYW'HSRVLWV 6799.8 -7176.2 4835.5 3134.2 -5284.6 -4491.1 *RYW6HFXULWLHV 18501.6 -172.1 -843.8 8128.7 -1.0 7111.8 2WKHU 6354.4 4984.1 9007.3 -3263.5 -529.5 10198.4
Net Credit to Banks -8145.5 -308.7 526.7 -1585.1 -365.8 -1732.9 Open Market Operations* 8012.0 -26312.3 -14940.4 -4407.2 -3062.8 -48722.7 Other -70.8 61.2 -316.9 -999.3 904.4 -350.6
MONETARY BASE 4768.5 -4339.9 426.5 1777.9 6664.7 4529.2
&XUUHQF\,VVXH 5072.0 -4495.9 -333.2 1618.4 6182.2 2971.5 &DVK5HVHUYH 89.0 168.5 839.5 105.8 274.3 1388.1 &XUUHQW$FFRXQW -392.4 -12.5 -79.8 53.7 208.2 169.6
Memo: 1,56WRFN 8601 HRS *URZWKLQ0RQHWDU\%DVH TUWO\ ,QÀDWLRQ TUWO\ * Includes only principal payments.
Table 2 BOJ REVERSE REPURCHASE RATES (%) DECEMBER 2003 – DECEMBER 2004 31 9 21 26 16 27 10 2 19 5 3 28 Dec. 03 Jan. Jan. Jan. Feb. Feb. Mar. Apr. Apr. May Sept. Dec. 30 Days 60 Days 90 Days 120 Days 180 Days 270 Days 365 Days
The Financial System 8 Annual Report 2004
2.2. Monetary Survey LQ+RZHYHULQUHDOWHUPVFXUUHQF\ZLWKWKHSXEOLF JUHZDWDVORZHUUDWHRISHUFHQWLQFRPSDUHG 1 'XULQJEURDGPRQH\0 LQFUHDVHGE\SHU WRSHUFHQWLQ$QLQFUHDVHLQWKHQXPEHURI FHQWDIDVWHUUDWHRIJURZWKWKDQWKHSHUFHQWUHFRUGHG debit cards issued by commercial banks would have in 2003 (see Table 3 7KLV RXWWXUQ ZDV XQGHUSLQQHG contributed to the slowdown in real growth in currency by faster rates of growth in local currency deposits and ZLWKWKHSXEOLF currency in circulation and a slower rate of increase in
IRUHLJQ FXUUHQF\ GHSRVLWV 7KH LQFUHDVHG GHPDQG IRU 4XDVL PRQH\ 6DYLQJV DQG 7LPH GHSRVLWV JUHZ DW D -DPDLFD 'ROODU GHSRVLWV RFFXUUHG DW UHODWLYHO\ ORZHU VOLJKWO\ VORZHU UDWH RI SHU FHQW LQ UHODWLYH rates of return consistent with an easing of monetary WR SHU FHQW LQ see Table 3 7KLV RXWWXUQ SROLF\DQGUHÀHFWHGDUHVWRUDWLRQRILQYHVWRUFRQ¿GHQFH UHÀHFWHG D PXFK VORZHU JURZWK LQ VDYLQJV GHSRVLWV LQWKHHFRQRP\GXULQJ DQGPRUHVSHFL¿FDOO\WKHIRUHLJQFXUUHQF\FRPSRQHQW RI WKHVH GHSRVLWV ZKLFK ZDV SDUWLDOO\ RIIVHW E\ D 2 1DUURZ PRQH\ 0 LQFUHDVHG E\ SHU FHQW D VWURQJ JURZWK LQ WLPH GHSRVLWV7KH IRUHLJQ FXUUHQF\ IDVWHUUDWHRIJURZWKWKDQWKHSHUFHQWUHFRUGHGLQ component of savings deposits grew at a slower rate of *URZWK LQ 0 GXULQJ ODUJHO\ UHÀHFWHG SHUFHQWGXULQJUHODWLYHWRSHUFHQWLQ D SHU FHQW LQFUHDVH LQ GHPDQG GHSRVLWV D IDVWHU LQ D FRQWH[W RI VWDEOH IRUHLJQ H[FKDQJH PDUNHW UDWH RI H[SDQVLRQ UHODWLYH WR SHU FHQW LQ FRQGLWLRQV 6LPXOWDQHRXVO\ GHVSLWH D ORZHULQJ RI 'HPDQGGHSRVLWVGHQRPLQDWHGLQORFDOFXUUHQF\JUHZ LQWHUHVWUDWHVWKHORFDOFXUUHQF\FRPSRQHQWRIVDYLQJV E\ SHUFHQWUHODWLYHWRDUHGXFWLRQRI SHUFHQW GHSRVLWV JUHZ DW D IDVWHU UDWH RI SHU FHQW GXULQJ LQ,PSURYHGRXWSXWOHYHOVIURPPRVWVHFWRUVLQ UHODWLYHWR SHUFHQWLQUHÀHFWLQJLQFUHDVHG the economy would have contributed to the outturn FRQ¿GHQFHLQWKHGRPHVWLFFXUUHQF\GXULQJWKHUHYLHZ IRU 'HPDQG GHSRVLWV GHQRPLQDWHG LQ IRUHLJQ \HDU7LPHGHSRVLWVLQFUHDVHGE\SHUFHQWGXULQJ FXUUHQF\LQFUHDVHGDWDQRWDEO\VORZHUUDWHGXULQJ UHODWLYH WR D UHGXFWLRQ RI SHU FHQW LQ UHÀHFWLQJJURZWKRISHUFHQWUHODWLYHWRSHU 7KHRXWWXUQIRUUHÀHFWHGLQFUHDVHVLQERWKORFDO FHQWLQ7KLVLVFRQVLVWHQWZLWKWKHVWURQJGHPDQG and foreign currency deposits with foreign currency IRU-DPDLFD'ROODUVREVHUYHGGXULQJWKH\HDU deposits growing at a relatively faster rate in the context RIKLJKHUIRUHLJQH[FKDQJHHDUQLQJVLQWKHHFRQRP\ &XUUHQF\ZLWKWKHSXEOLFUHFRUGHGJURZWKRISHU FHQWDVOLJKWO\IDVWHUUDWHWKDQWKHSHUFHQWLQFUHDVH
1 . Money supply M2* represents banking system domestic and foreign currency liabilities to the private sector in the form of notes and coin as well as demand, time and saving deposits. 2 . M1* is comprised of notes and coin and demand deposits.
The Financial System Bank of Jamaica
Table 3 MONEY SUPPLY , M2* (DOMESTIC AND FOREIGN CURRENCY) (J$M)
COMPONENTS OF MONEY SUPPLY 2003 2004 2003 2004 (J$M) (J$M) % %
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Quasi Money 6DYLQJV'HSRVLWV 7LPH'HSRVLWV SOURCES OF MONEY SUPPLY
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The Financial System 10 Annual Report 2004
Chart 2
D VORZHU UDWH UHODWLYH WR WKH ¿UVW TXDUWHU UHÀHFWHG DQ operations absorbed liquidity at progressively lower LQFUHDVHGFRQ¿GHQFHLQ-DPDLFD'ROODUV)RUWKH-XO\ UDWHVRIUHWXUQGXULQJWKH\HDU WR 6HSWHPEHU TXDUWHU IRUHLJQ FXUUHQF\ GHSRVLWV JUHZ E\SHUFHQWDVLQYHVWRUVDWWHPSWHGWRPDLQWDLQD86 While local currency deposits grew at a faster rate than dollar hedge in their asset portfolios subsequent to the IRUHLJQ FXUUHQF\ GHSRVLWV GXULQJ WKH TXDUWHUO\ PDWXULW\RID*2-86LQVWUXPHQWLQ-XO\%H\RQG JURZWKSDWWHUQUHÀHFWHGFKDQJHVLQWKHPDFURHFRQRPLF WKLV XQFHUWDLQW\ HPHUJHG JLYHQ WKH ULVLQJ SULFHV RI HQYLURQPHQW'XULQJWKH¿UVWTXDUWHURIWKHUHYLHZ\HDU LPSRUWHG FRPPRGLWLHV SDUWLFXODUO\ RLO DQG GRPHVWLF both local and foreign currency deposits increased at SULFHLQFUHDVHVDVVRFLDWHGZLWKWKHLPSDFWRI+XUULFDQH a faster rate relative to that which obtained during the ,YDQ7KHJURZWKLQIRUHLJQFXUUHQF\GHSRVLWVRFFXUUHG 'HFHPEHU TXDUWHU +RZHYHU JURZWK LQ IRUHLJQ in tandem with relatively slower growth in local currency deposits exceeded that of local currency currency deposits as investors shifted their resources GHSRVLWV )RUHLJQ FXUUHQF\ GHSRVLWV JUHZ E\ SHU into alternate domestic assets that offered relatively cent and coincided with increased foreign exchange KLJKHUUDWHVRIUHWXUQ HDUQLQJVE\WKH7RXULVPDQG0LQLQJVHFWRUV ,QUHVSRQVHWRWKHMLWWHUVWKDWHPHUJHGLQWKHWKLUGTXDUWHU *URZWKLQEURDGPRQH\0 GXULQJWKH-XQHTXDUWHU the Bank maintained a conservative monetary policy UHÀHFWHGDQLQFUHDVHRISHUFHQWLQORFDOFXUUHQF\ VWDQFH WKDW FXUWDLOHG FRUH LQÀDWLRQ *LYHQ WKLV DQG D GHSRVLWV DV IRUHLJQ FXUUHQF\ GHSRVLWV GHFOLQHG E\ JURZLQJVHQWLPHQWWKDWWKH¿VFDOWDUJHWZRXOGEHPHW SHUFHQWJLYHQWKHFRQWLQXHGORZHULQJRILQÀDWLRQDQG WKHUH ZDV D VWUHQJWKHQLQJ RI LQYHVWRU FRQ¿GHQFH WKDW stable foreign exchange market conditions (see Chart 2 was evident in a notable slowdown in the accumulation 7KHIXUWKHUJURZWKLQORFDOFXUUHQF\GHSRVLWVDOEHLWDW of foreign currency deposits and a build up in local
The Financial System 11 Bank of Jamaica
FXUUHQF\ GHSRVLWV GXULQJ WKH 'HFHPEHU TXDUWHU 7KH TXDOLW\LQ7KHQXPEHURIFRPPHUFLDOEDQNVLQ growth in local currency deposits exceeded that of RSHUDWLRQ UHPDLQHG DW VL[ ZLWK %DQN RI 1RYD 6FRWLD IRUHLJQFXUUHQF\GHSRVLWVDVZHOODVWKHRXWWXUQIRUWKH %16 1DWLRQDO&RPPHUFLDO%DQN 1&% DQG5%77 6HSWHPEHUTXDUWHU -DPDLFDDFFRXQWLQJIRUSHUFHQWRIWRWDODVVHWVDV DW'HFHPEHU $OWKRXJKPRQH\VXSSO\LQFUHDVHGDWDIDVWHUUDWHWKDQ LQWKH&HQWUDO%DQNZDVVXFFHVVIXOLQPDLQWDLQLQJ 1.1.1 Assets and Liabilities UHODWLYHVWDELOLW\LQWKH¿QDQFLDOPDUNHWVGXULQJ The commercial banking sector’s asset base increased This outturn augurs well for the achievement of the E\SHUFHQWLQUHODWLYHWRJURZWKRI SHU LQÀDWLRQ WDUJHW IRU 7KH PDLQWHQDQFH RI D ORZ FHQW LQ 7KH VORZHU UDWH RI JURZWK ZDV ODUJHO\ LQÀDWLRQHQYLURQPHQWZLOOIDFLOLWDWHDQLQFUHDVHLQORFDO UHÀHFWHG LQ Loans & Advances ZKLFK ZDV WKH PDLQ FXUUHQF\ GHSRVLWV DQG E\ H[WHQVLRQ JURZWK LQ 0 source of growth in commercial bank assets (see Table WKDWLVOLQHZLWKQRPLQDO*'3,WLVHQYLVDJHGWKDWDQ 4 ,QDFRQWH[WRIIRUHLJQH[FKDQJHPDUNHWVWDELOLW\WKH expansion in banking system credit to the private sector expansion in Loans & AdvancesZDVODUJHO\UHÀHFWHG LQ IRUHLJQ FXUUHQF\ ORDQV ZKLFK DFFRXQWHG IRU will be the major source of this increase in money SHUFHQWRIWKHLQFUHDVHLQ7KHLQFUHDVHGXVHRI VXSSO\ SULYDWHFDSLWDOLQÀRZVZDVDFRQWULEXWLQJIDFWRUWRWKH 2.3. Commercial Banks slower rate of growth in loans and advances during the \HDU The assets of the commercial banking sector continued WRUHFRUGVWURQJJURZWKGXULQJDOEHLWDWDVORZHU 'HVSLWH D UHGXFWLRQ LQ FRPPHUFLDO EDQNV¶ UDWHWKDQIRU7KLVGHFHOHUDWLRQUHÀHFWHGVORZHU holdings of Investments3 continued to dominate JURZWK LQ ORDQV DGYDQFHV ZKLFK ZDV DWWULEXWHG WR WKH LQVWLWXWLRQV¶ DVVHW SRUWIROLR DFFRXQWLQJ IRU VLJQL¿FDQW QHW UHSD\PHQWV IURP WKH SULYDWH VHFWRU SHU FHQW RI WRWDO DVVHWV DV DW 'HFHPEHU following the surge in lending activity during the (see Chart 3 7KLV GHFUHDVH ZDV ODUJHO\ UHÀHFWHG LQ *2-GRPHVWLFVHFXULWLHVH[SOLFDWHGE\DUHGXFWLRQLQ SUHYLRXVWZR\HDUV&RQFXUUHQWO\WKHUHZDVDQRWDEOH WKH *RYHUQPHQW¶V GHPDQG IRU GRPHVWLF ¿QDQFLQJ LQ H[SDQVLRQ LQ ORFDO FXUUHQF\ GHSRVLWV LQ D FRQWH[W $JDLQVWWKLVEDFNJURXQGWKHUHZDVDVLJQL¿FDQW RI LPSURYHG FRQ¿GHQFH LQ WKH -DPDLFD 'ROODU 7KLV LQFUHDVHLQWKHEDQNV¶KROGLQJVRI%2-FHUWL¿FDWHVRI FRQVWLWXWHGDPDMRUVRXUFHRI¿QDQFLQJLQ*LYHQ GHSRVLWVDWORZHUUDWHVRIUHWXUQUHÀHFWLQJDFRQWLQXHG WKH VWDEOH IRUHLJQ H[FKDQJH PDUNHW FRQGLWLRQV WKHUH LPSURYHPHQW LQ LQYHVWRU FRQ¿GHQFH see Table 4 was a substitution by one bank of costly repurchase This increase was a major contributor to the growth agreements contracted in 2003 with funds borrowed LQWKHVHFWRU¶VDVVHWEDVHLQ7KHGHFOLQHLQ*2- IURPRYHUVHDVLQVWLWXWLRQV7KLVSURYLGHGDQRWKHUPDMRU domestic currency securities resulted in a continued VRXUFH RI ¿QDQFLQJ IRU WKH LQVWLWXWLRQ¶V RSHUDWLRQV decrease in the ratio of domestic currency investments GXULQJWKH\HDU'XHWRDFRQWLQXHGGHFOLQHLQSDVWGXH WRWRWDOLQYHVWPHQWVWRSHUFHQWIURPSHUFHQW ORDQV WKHUH ZDV DQ LPSURYHPHQW LQ WKH EDQNV¶ DVVHW LQDQG SHUFHQWLQ
3 Investment represents securities (domestic and foreign) held by the commercial banks and exclude securities bought for resale. The Financial System 12 Annual Report 2004
Table 4
COMMERCIAL BANK SUMMARY OF ASSETS AND LIABILITIES (J$M) Stock Flows Flows Flows % % % 2004 2002 2003 2004 2002 2003 2004
ASSETS Cash and Bank Balances 3ODFHPHQWVZLWK2YHUVHDV%DQNV ,QYHVWPHQWV 'RPHVWLF&XUUHQF\ %2-VHFXULWLHV -DPDLFD*RYHUQPHQW6HFXULWLHV Table 4 2WKHU3XEOLF6HFWRU 2WKHU/RFDO -Foreign Currency -D*RY)RUHLJQ6HFXULWLHV 6HFXULWLHV3XUFKDVHGIRUUHVDOH /RDQV 1HWRISURYLVLRQLQJ 'RPHVWLF Foreign $FFRXQWV5HFHLYDEOH )L[HG$VVHWV 2WKHU$VVHWV )RUHLJQ$VVHWV LIABILITIES & CAPITAL 'HSRVLWV 'RPHVWLF Foreign 'XHWR%DQNRI-DPDLFD 'XHWR&RPPHUFLDOEDQNV 'XHWR2YHUVHDVEDQNV 'XHWR6SHFLDOLVHG,QVWLWXWLRQV 6HFXULWLHVVROGXQGHU5HSXUFKDVH $JUHHPHQWV 2WKHU/LDELOLWLHV &DSLWDO$FFRXQW Foreign Liabilities
Data account for provisioning ,QYHVWPHQWVDQG&DVKDQG%DQN%DODQFHVDGMXVWHGWRUHÀHFWUHFODVVL¿FDWLRQRI&HUWL¿FDWHVRI'HSRVLWVIURP³RWKHUDFFRXQWV designated as liquid” to BOJ securities
The Financial System 13 Bank of Jamaica
Chart 3: The Composition of Commercial Banks’ Assets at 31 December 2003 and 31 December 2004 $QRWKHUVLJQL¿FDQWHOHPHQWRIJURZWKLQWKHVHFWRU¶VDVVHWEDVHZDVDQLQFUHDVHLQIRUHLJQFXUUHQF\SODFHPHQWVZLWK
RYHUVHDVEDQNV7KLVZDVSULPDULO\UHÀHFWHGLQRQHODUJH LQVWLWXWLRQZKLFKUHFRUGHGJURZWKRI-PLOOLRQ $ GLVDJJUHJDWLRQ RI WRWDO EDQN GHSRVLWV UHYHDOHG WKDW LQ6HSWHPEHU,QDGGLWLRQWKHUHZDVDQLQFUHDVHRI the faster rate of expansion recorded in 2004 relative - PLOOLRQLQIRUHLJQFXUUHQF\SODFHPHQWVE\RQH WR WKH SUHYLRXV \HDU ZDV ODUJHO\ UHÀHFWHG LQ D EXLOG VPDOOEDQNZLWKLWVKHDGRI¿FHRYHUVHDVLQ1RYHPEHU up in deposits held by the Government and the private 7KHVHSODFHPHQWVFRXOGKDYHEHHQDWWULEXWHGWR VHFWRU2IWKHLQFUHDVHLQSULYDWHVHFWRUGHSRVLWVWLPH DQLQFUHDVHLQLQWHUHVWUDWHVLQWKH86HFRQRP\GXULQJ GHSRVLWVLQFUHDVHGE\SHUFHQWFRPSDUHGWRWKH SHUFHQWUHGXFWLRQREVHUYHGLQZKHUHDVGHPDQG GHSRVLWVJUHZDWDIDVWHUUDWHRISHUFHQWUHODWLYHWR 7KH LQFUHDVH LQ WKH VHFWRU¶V DVVHW EDVH ZDV ¿QDQFHG DQLQFUHDVHRISHUFHQWLQ mainly through a faster rate of growth in total bank With regard to the currency composition of private GHSRVLWV LQ SDUWLFXODU ORFDO FXUUHQF\ GHSRVLWV see GHSRVLWVWKHUDWLRRIIRUHLJQFXUUHQF\GHSRVLWVWRWRWDO Table 4 7KHH[SDQVLRQLQORFDOFXUUHQF\GHSRVLWVLQ SULYDWHVHFWRUGHSRVLWOLDELOLWLHVUHPDLQHGEDVLFDOO\ÀDW 2004 was in contrast to the decline recorded in 2003 DWSHUFHQWUHODWLYHWRHQG'HFHPEHUKDYLQJ DQGUHÀHFWHGWKHFRQWLQXHGLPSURYHPHQWLQFRQ¿GHQFH SHDNHGDWSHUFHQWLQ)HEUXDU\DQGUHFRUGLQJ 7KLV LPSURYHPHQW LQ FRQ¿GHQFH FRXSOHG ZLWK WKH DORZRISHUFHQWLQ-XO\ see Chart 4 7KH relatively stable foreign exchange market conditions peak in the ratio would have been attributed to increased resulted in a slower rate of growth in foreign currency foreign exchange earnings by the Tourism and Bauxite GHSRVLWVLQUHODWLYHWR VHFWRUVGXULQJWKH¿UVWTXDUWHURI
The Financial System 14 Annual Report 2004
Table 5
COMMERCIAL BANKS TOTAL DEPOSITS (J$M)
6WRFNV 6WRFNV )ORZV )ORZV )ORZV 2003 2004 2002 2003 2002 2002 2003 2004
'HSRVLWV 3ULYDWH6HFWRU 'HPDQG 6DYLQJV 7LPH *RYHUQPHQW 2WKHU
/1 Deposits adjusted for Net Items in the Process of Collection
Table 6
COMMERCIAL BANKS LOCAL AND FOREIGN CURRENCY DEPOSITS /1 (PRIVATE SECTOR) (J$M)
6WRFNV 6WRFNV )ORZV )ORZV )ORZV 2003 2004 2002 2003 2004 2002 2003 2004 Private 6HFWRU'HSRVLWV /RFDO&XUUHQF\ )RUHLJQ&XUUHQF\
/1 Deposits adjusted for Net Items in the Process of Collection
The Financial System Bank of Jamaica
Chart 4: Foreign Currency Deposits to Total Deposits December 2002 to 2004
The operations of the commercial banking sector were against the background of the reduced demand for credit DOVR¿QDQFHGWKURXJKERUURZLQJVIURPRYHUVHDVEDQNV during 2004 and was evidence of the improvement in ZKLFK LQFUHDVHG E\ SHU FHQW GXULQJ 7KLV FRQ¿GHQFH7KHJURZWKLQWKHEDQNV¶GRPHVWLFFXUUHQF\ ZDVUHODWLYHWRWKHJURZWKRISHUFHQWREVHUYHGLQ cash reserves was as a result of strong growth in the 7KHIDVWHUUDWHRIH[SDQVLRQLQERUURZLQJVIURP EDQNV¶ GHSRVLW OLDELOLWLHV LQ &RQVHTXHQW RQ WKH overseas banks 2004 was concentrated in one major bank H[SDQVLRQ LQ OLTXLG DVVHW KROGLQJV WKH EDQNV¶ H[FHVV and provided that institution with an alternate source UHVHUYHVURVHWRPLOOLRQUHÀHFWLQJD RI ¿QDQFLQJ WR WKH KLJKFRVW UHSXUFKDVH DJUHHPHQWV PLOOLRQLQFUHDVHUHODWLYHWRLWVOHYHODWHQG'HFHPEHU FRQWUDFWHGLQ
2.3.2. Liquidity 2.3.3. Interest Rates and Spreads
The statutory cash reserve and liquid asset requirements 'XULQJ WKHUH ZHUH VHYHUDO UHGXFWLRQV LQ UDWHV IRUFRPPHUFLDOEDQNVZHUHPDLQWDLQHGDW SHUFHQW offered on the Bank of Jamaica’s open market DQG SHU FHQW UHVSHFWLYHO\ GXULQJ $JDLQVW VHFXULWLHV7KLVWUDQVODWHGLQWRGHFUHDVHVLQWKHRYHUDOO WKLVEDFNJURXQGWKHVHFWRU¶VKROGLQJVRIOLTXLGDVVHWVDW average weighted rates offered on commercial bank HQG'HFHPEHUZDVSHUFHQWFRPSDUHGWR deposits and loans (see Table 8 7KH LQVWLWXWLRQV SHU FHQW DW HQG 'HFHPEHU 7KH JURZWK LQ were able to attract deposits at a lower cost due to ZDV ODUJHO\ UHÀHFWHG LQ LQFUHDVHV LQ WKH LQVWLWXWLRQV¶ *RYHUQPHQW¶VUHGXFHGGHPDQGIRUGRPHVWLF¿QDQFLQJ KROGLQJV RI %2- UHYHUVH UHSXUFKDVH LQVWUXPHQWV LQUHODWLYHWR+RZHYHUGHVSLWHWKHGHFOLQH and domestic currency cash reserves (see Table 7 LQWKHRYHUDOODYHUDJHZHLJKWHGUDWHWKHFRVWRIIRUHLJQ 7KH LQFUHDVH LQ KROGLQJV RI %2- UHYHUVH UHSXUFKDVH currency deposits to the institutions remained virtually LQVWUXPHQWV DW UHODWLYHO\ ORZHU UDWHV RI UHWXUQ FRPHV XQFKDQJHG WKURXJKRXW $V UHJDUGV WKH FRVW RI
The Financial System 16 Annual Report 2004
Table 7
&200(5&,$/%$1.6 /,48,'$66(76 2002 2003 2004 'HF 'HF 0DU -XQ 6HS 'HF 6WDWXWRU\/LTXLGLW\ &DVK5HVHUYH5DWLR /LTXLG$VVHWV5DWLR
$YHUDJH/LTXLG$VVHWV+ROGLQJV
/LTXLG$VVHWV -%1 1RWHVDQG&RLQV &XUUHQW$FFRXQW &DVK5HVHUYH 2WKHU*RYHUQPHQW6HFXULWLHV 7UHDVXU\%LOOV /RFDO5HJLVWHUHG6WRFNV 5HY5HSXUFKDVH$JUHHPHQWV 7RWDO
3UHVFULEHG/LDELOLWLHV -%1 ([FHVV5HVHUYHV
* Net of securities pledged as collateral
ORDQVDJHQHUDOUHGXFWLRQLQWKHGHPDQGIRUEDQNFUHGLW have been attributed to the stability maintained in the LQ D FRQWH[W RI LQFUHDVHG SULYDWH FDSLWDO LQÀRZV WR IRUHLJQH[FKDQJHPDUNHW7KHLPSDFWRIWZRQDWXUDO ¿QDQFHUHDOVHFWRUSURMHFWVFRQWULEXWHGWRWKHGHFUHDVH GLVDVWHUV LQ WKH 6HSWHPEHU TXDUWHU ZDV DOVR D LQORDQUDWHVLQ1RWZLWKVWDQGLQJWKHGHFOLQHLQWKH contributing factor to the increased demand for loans RYHUDOOZHLJKWHGDYHUDJHORDQUDWHKRZHYHUWKHUHZDV GXULQJ WKH VHFRQG KDOI RI &RQVHTXHQWO\ WKH an increase in the cost of foreign currency loans during foreign currency average weighted loan rate increased WKHVHFRQGKDOIRI7KLVLQFUHDVHZDVPDLQO\GXH E\ EDVLV SRLQWV GXULQJ WKH VHFRQG KDOI RI WR D KHLJKWHQHG GHPDQG IRU IRUHLJQ FXUUHQF\ ORDQV FRPSDUHGWRDGHFUHPHQWRIEDVLVSRLQWVIRUWKH¿UVW SDUWLFXODUO\LQWKH'HFHPEHUTXDUWHUZKLFKFRXOG six months of 2004 (see Table 8
The Financial System Bank of Jamaica
)ROORZLQJ D VLJQL¿FDQW LQFUHDVH LQ FRPPHUFLDO loans extended to other public sector entities and Central EDQNV¶LQWHUHVWUDWHVSUHDGQDUURZHGE\ EDVLVSRLQWV *RYHUQPHQW7KHVHFRQWUDFWLRQVZHUHDWWULEXWHGWRWKH WRSHUFHQWDJHSRLQWVDWHQG'HFHPEHU see UHGXFWLRQ LQ WKH GHPDQG IRU EDQN ORDQV LQ GXH Table 9 7KLVZDVFRQVLVWHQWZLWKDQHDVLQJRIPRQHWDU\ WRDFRQWLQXHGLPSURYHPHQWLQWKH*RYHUQPHQW¶V¿VFDO SROLF\E\WKH&HQWUDO%DQNGXULQJZKLFKOHGWRD RSHUDWLRQV larger reduction in the overall average weighted loan 2.3.4. Loans and Advances rate vis-à-vis the overall average weighted deposit rate RIFRPPHUFLDOEDQNV7KHUHGXFWLRQLQWKHRYHUDOOVSUHDG The stock of commercial bank loans and advances ODUJHO\UHÀHFWHGVLJQL¿FDQWGHFUHDVHVLQWKHVSUHDGRQ RXWVWDQGLQJUHÀHFWHGDVORZHUUDWHRILQFUHDVHRI
Table 8
INTEREST RATES IN DOMESTIC MARKETS
2002 2003 2004 'HF 'HF 0DU -XQ 6HS 'HF
&200(5&,$/%$1.6 2YHUDOO$YHUDJH:HLJKWHG/RDQ5DWH
)RUHLJQ&XUUHQF\$YHUDJH :HLJKWHG/RDQ5DWH
2YHUDOO$YHUDJH:HLJKWHG'HSRVLW5DWH 'HPDQG 6DYLQJV 7LPH &HUWL¿FDWHVRI'HSRVLW PRQWK PRQWK PRQWK
)RUHLJQ&XUUHQF\$YHUDJH :HLJKWHG'HSRVLW5DWH 'HPDQG 6DYLQJV 7LPH
*2-0217+75($685<%,//5$7(
%2-'$<5(385&+$6( $*5((0(175$7(
35,9$7(021(<0$5.(75$7(
The Financial System 18 Annual Report 2004
SHUFHQWIRUUHODWLYHWRDQH[SDQVLRQRISHU 'HVSLWH WKLV VORZGRZQ KRZHYHU WKH VWRFN RI ORDQV cent in 2003 (see Table 10 ,QUHDOWHUPVWKHJURZWK outstanding to the private sector continued to dominate LQORDQVDQGDGYDQFHVVORZHGFRQVLGHUDEO\WR SHU WKH FRPPHUFLDO EDQNV¶ ORDQ SRUWIROLR DFFRXQWLQJ IRU FHQW LQ FRPSDUHG WR LQFUHDVHV RI SHU FHQW SHUFHQWDWHQG'HFHPEHUFRPSDUHGWR LQ DQG SHU FHQW LQ 7KH GHFHOHUDWLRQ SHUFHQWDWHQG'HFHPEHUDQG SHUFHQWDWHQG in the growth in loans and advances was in a context 'HFHPEHU RIDQLQFUHDVHLQWKHXVHRISULYDWHFDSLWDOLQÀRZVDV DPDMRUVRXUFHRI¿QDQFLQJUHDOVHFWRUSURMHFWVGXULQJ 'XULQJ WKHUH ZDV D SHU FHQW H[SDQVLRQ LQ WKH \HDU $V D UHVXOW WKH VORZHU UDWH RI JURZWK LQ WKH FRPPHUFLDO EDQNV¶ SULYDWH VHFWRU ORDQ SRUWIROLR ORDQVH[WHQGHGWRWKHSULYDWHVHFWRULQUHÀHFWHG 7KLV ZDV VLJQL¿FDQWO\ VORZHU WKDQ WKH LQFUHDVHV RI D QRUPDOL]DWLRQ RI WKH UDWH RI LQFUHDVH IROORZLQJ WKH SHU FHQW DQG SHU FHQW LQ DQG VXUJHLQOHQGLQJDFWLYLW\RYHUWKHSUHYLRXVWZR\HDUV UHVSHFWLYHO\7KHVORZHUUDWHRILQFUHDVHLQZDV
Table 9
COMMERCIAL BANK INTEREST RATE SPREADS (BY SECTOR)
2002 2003 2004 'HF 'HF 0DU -XQ 6HS 'HF
29(5$//$9(5$*(:(,*+7('/2$15$7(
29(5$//$9(5$*(:(,*+7(''(326,75$7(
29(5$//635($'
,QVWDOOPHQW&UHGLW 0RUWJDJH 3HUVRQDO &RPPHUFLDO &HQWUDO*RYHUQPHQW 2WKHU3XEOLF6HFWRU
The Financial System Bank of Jamaica
SULPDULO\UHÀHFWHGLQWKHFDWHJRULHVRIPersonal Loans RIJURZWKLQORDQVH[WHQGHGLQODUJHO\UHÀHFWHG and Tourism 7KHVH LQFUHDVHV ZHUH SDUWO\ FRXQWHUHG WKH FRPSOHWLRQ RI ¿QDQFLQJ DUUDQJHPHQWV UHODWHG WR by VLJQL¿FDQW QHW UHSD\PHQWV IURP WKH Transport, refurbishing activities between the banks and several Storage & Communication Distribution and Mining KRWHOVLVODQGZLGH & Quarrying sectors (see Table 10 7KH VHFWRUV RI Consequent on the deceleration in the growth in loans Transport Storage & Communication Tourism and Personal loans continued to dominate the share of WR WKH SULYDWH VHFWRU WKH UDWLR RI QRQSHUIRUPLQJ WR SULYDWH VHFWRU ORDQV RXWVWDQGLQJ DFFRXQWLQJ IRU WRWDOORDQVRXWVWDQGLQJGHFOLQHGWRSHUFHQWDWHQG SHUFHQWDVDW'HFHPEHUUHODWLYHWR SHU 'HFHPEHU IURP SHU FHQW DW HQG 'HFHPEHU FHQWDWHQG'HFHPEHU see Chart 5 'HVSLWHD DQG SHU FHQW DW HQG 'HFHPEHU 7KHVH decline in the cost of funds during 2004 and given the ratios compare very favourably with the international JHQHUDOGHFUHDVHLQGHPDQGIRUEDQNFUHGLWWKHUHZDV EHQFKPDUNRISHUFHQW the slower rate of expansion in Personal Loans relative 'XULQJWKHUDWHRILQFUHDVHLQORDQVDQGDGYDQFHV WR$VUHJDUGVWKHTourismVHFWRUWKHVORZHUUDWH GHQRPLQDWHGLQ8QLWHG6WDWHVGROODUVGHFHOHUDWHGWR Table 10 COMMERCIAL BANKS TOTAL LOANS AND ADVANCES (J$M) Stocks Stocks Flows Flows Flows % % % 2003 2004 2002 2003 2004 2002 2003 2004
3XEOLF6HFWRU 2WKHU)LQDQFLDO,QVWLWXLRQV 3ULYDWH6HFWRU $JULFXOWXUHDQG)LVKLQJ 0LQLQJDQG4XDUU\LQJ 0DQXIDFWXULQJ Construction & Land 'HYHORSPHQW 7UDQVSRUW6WRUDJH &RPPXQLFDWLRQ 7RXULVP 'LVWULEXWLRQ 3URIHVVLRQDO 2WKHU 6HUYLFHV 3HUVRQDO/RDQV (OHFWULFLW\*DV :DWHU (QWHUWDLQPHQW 2YHUVHDV5HVLGHQWV
727$/
The Financial System 20 Annual Report 2004
Chart 5: Distribution of Private Sector Loans and Advances at 31 December 2003 and 31 December 2004
SHUFHQWUHODWLYHWRJURZWKRISHUFHQWLQ7KH contributed to the increased demand for foreign currency slower rate of growth in foreign currency loans for 2004 ORDQV)RUWKH'HFHPEHUTXDUWHUIRUHLJQFXUUHQF\ ZDVUHÀHFWHGLQWKHSXEOLFVHFWRUDQGWKHSULYDWHVHFWRU ORDQVLQFUHDVHGE\SHUFHQWUHODWLYHWRDJURZWKRI DV IRUHLJQ FXUUHQF\ ORDQV H[WHQGHG WR RWKHU ¿QDQFLDO SHUFHQWGXULQJWKH¿UVWQLQHPRQWKVRIDQGDQ LQVWLWXWLRQVDFFHOHUDWHGWRDQLQFUHDVHRISHUFHQW LQFUHDVHRI SHUFHQWLQWKH'HFHPEHUTXDUWHU (see Table 11 7KHGHFHOHUDWLRQLQWKHJURZWKLQORDQV &RQVHTXHQWRQWKLVWKHSURSRUWLRQRIIRUHLJQFXUUHQF\ extended to the public sector and the private sector was ORDQVWRWRWDOORDQVDQGDGYDQFHVDWHQG'HFHPEHU FRQVLVWHQWZLWKWKHUHGXFHGGHPDQGIRUEDQNFUHGLWDVD LQFUHDVHGWRSHUFHQWUHODWLYHWRSHUFHQWDWHQG UHVXOWRIWKHLQFUHDVHLQIRUHLJQH[FKDQJHÀRZVWRWKHVH 'HFHPEHUDQG SHUFHQWDVDW'HFHPEHU VHFWRUVLQ
1RWZLWKVWDQGLQJ WKH GHFHOHUDWLRQ LQ WKH JURZWK LQ The expansion in foreign currency loans to the ORDQV GHQRPLQDWHG LQ 8QLWHG 6WDWHV GROODUV KRZHYHU SULYDWH VHFWRU ZDV PDLQO\ UHÀHFWHG LQ WKH VHFWRUV there was an increase in the demand for these loans in of Tourism Professional & Other Services WKH 'HFHPEHU TXDUWHU 7KLV LQFUHDVHG GHPDQG Distribution, Manufacturing and Transport, Storage was in a context of stable foreign exchange market & Communication0RVWRIWKHH[SDQVLRQLQORDQVWR FRQGLWLRQVZKLFKHQKDQFHGWKHDWWUDFWLYHQHVVRIWKHVH the Tourism, Manufacturing and Distribution sectors ORDQV)XUWKHUWKHQHHGWR¿QDQFHLQIUDVWUXFWXUHUHSDLUV RFFXUUHG LQ 1RYHPEHU DQG ZDV FRQFHQWUDWHG that had to be undertaken by the public sector and the LQ WZR LQVWLWXWLRQV 7KHVH LQFUHDVHV ZHUH PDLQO\ WR SULYDWHVHFWRULQWKHDIWHUPDWKRI+XUULFDQH,YDQDOVR facilitate repairs to infrastructure in the aftermath of
The Financial System 21 Bank of Jamaica
Table 11
COMMERCIAL BANKS FOREIGN CURRENCY LOANS AND ADVANCES (US$’000)
6WRFNV 6WRFNV )ORZV )ORZV )ORZV 2003 2004 2002 2003 2004 2002 2003 2004
3XEOLF6HFWRU 2WKHU)LQDQFLDO,QVWLWXLRQV 3ULYDWH6HFWRU $JULFXOWXUH 0LQLQJ 4XDUU\LQJ 0DQXIDFWXULQJ &RQVW /DQG'HYHORSPHQW 7UDQVSRUW6WRUDJH &RPP (OHFWULFLW\*DV :DWHU 'LVWULEXWLRQ 7RXULVP (QWHUWDLQPHQW 3URIHVVLRQDO 2WKHU6HUYLFHV 3HUVRQDO/RDQV /RDQVWR2YHUVHDV5HVLGHQWV
727$/
+XUULFDQH,YDQ7KHH[SDQVLRQLQORDQVWRProfessional loans to total foreign currency loans outstanding & Other Services ODUJHO\ UHÀHFWHG DQ LQFUHDVH RI GHFUHDVHGWR SHUFHQWIURPSHUFHQWDWHQG 86 PLOOLRQLQORDQVH[WHQGHGE\RQHRIWKHPDMRU 'HFHPEHU LQVWLWXWLRQVLQ0D\)XUWKHUWKHUHZDVDVORZHU rate of growth in foreign currency loans to Tourism and The ratio of commercial banks’ advances to deposits Transport, Storage & Communication LQ 7KH UHPDLQHGYLUWXDOO\ÀDWGXULQJ see Chart 6 $W deceleration in the growth in loans to the Transport, HQG'HFHPEHUWKHDGYDQFHWRGHSRVLWVUDWLRZDV Storage & Communication sector was tempered by a SHUFHQWUHODWLYHWRSHUFHQWDWHQG'HFHPEHU 86PLOOLRQORDQH[WHQGHGE\RQHPDMRUEDQNWR ,W LV HQYLVDJHG WKDW WKHUH ZLOO EH DQ XSWXUQ LQ DLUWUDQVSRUWDWLRQLQ1RYHPEHU$WHQG'HFHPEHU WKHUDWLRGXULQJLQWKHFRQWH[WRIH[SHFWDWLRQVRI WKHSURSRUWLRQRISULYDWHVHFWRUIRUHLJQFXUUHQF\ IXUWKHUUHGXFWLRQVLQLQWHUHVWUDWHV
The Financial System 22 Annual Report 2004
Chart 6: Commercial Bank Advance to Deposits Ratio March 2001 to December 2004
2.4. Other Financial Intermediaries ZLWKSHUFHQWRIWKHLUDVVHWVGHQRPLQDWHGLQIRUHLJQ 2.4.1. Financial Institutions Act Licensees FXUUHQF\FRPSDUHGWRSHUFHQWLQ (FIAs) 2.4.1.1. Assets & Liabilities There was notable growth in the asset base of the ),$V GXULQJ WKH UHYLHZ SHULRG DV ZHOO DV IXUWKHU 7KHDVVHWEDVHRIWKH),$VH[SDQGHGE\SHUFHQW FRQVROLGDWLRQ DPRQJ WKH HQWLWLHV 'XULQJ WKH GXULQJ WKH UHYLHZ SHULRG UHODWLYH WR DQ H[SDQVLRQ RI QXPEHU RI LQVWLWXWLRQV LQ RSHUDWLRQ GHFOLQHG WR ¿YH SHU FHQW LQ 7KH LQFUHDVH LQ DVVHWV GXULQJ IURP VHYHQ DW HQG FRQVHTXHQW RQ WKH FORVXUH the period was largely underpinned by an expansion of RIRQHDQGDPHUJHURIWZROLFHQVHHV7KHJURZWKLQ SHUFHQWDQGSHUFHQWLQInvestment and Loans WKHDVVHWEDVHWKRXJKORZHUWKDQWKDWREVHUYHGGXULQJ & Advances UHVSHFWLYHO\7KH JURZWK LQ Investments ZDVODUJHO\UHÀHFWHGLQLQFUHDVHVLQWKHHQWLWLHV¶ GXULQJ ODUJHO\ UHÀHFWHG H[SDQVLRQV LQ IRUHLJQ holdings of Investments7KHH[SDQVLRQLQDVVHWVZDV FXUUHQF\ LQYHVWPHQWV ZKLFK UHSUHVHQWHG SHU ¿QDQFHGPDLQO\E\Borrowings from Other Financial FHQWRIWKHWRWDOLQFUHDVHLQWKHFDWHJRU\7KHLQFUHDVH Institutions 7KHUH ZHUH DOVR VLJQL¿FDQW LQFUHDVHV LQ in Loans and Advances over the review period was WKHGHSRVLWEDVHRIWKHVHHQWLWLHVLQWKHFRQWH[WRIWKH FRQFHQWUDWHGLQORFDOFXUUHQF\ORDQVZKLFKH[SDQGHG realignment of the institutions’ operations with their E\SHUFHQWUHODWLYHWRSHUFHQWLQWKHSUHYLRXV FRUHEXVLQHVV7KHLQVWLWXWLRQVZHUHKHDYLO\GROODUL]HG \HDU7KHDQQXDOJURZWKRIIRUHLJQFXUUHQF\ORDQVIHOOWR
The Financial System 23 Bank of Jamaica
Table 12
ASSETS AND LIABILITIES OF FIAS 2003 AND 2004 (J$M)
'HFHPEHU )ORZV &KDQJH )ORZ &KDQJH $VVHWV Cash and Bank Balances with Commercial Banks %DODQFHVZLWK2WKHU)LQDQFLDO,QVWLWXWLRQV %DODQFHVZLWK%DQNRI-DPDLFD ,QYHVWPHQWV 6HFXULWLHV3XUFKDVHGZLWK9LHZRI5HVDOH /RDQV $GYDQFHV QHWRISURYLVLRQ $FFRXQWV5HFHLYDEOH 2WKHU$VVHWV 727$/
)RUHLJQ$VVHWV
Liabilities 'HSRVLWV %DODQFHVGXHWR&RPPHUFLDO%DQNV %DODQFHVGXHWR6SHFLDOLVHG,QVWLWXWLRQV %RUURZLQJVIURP2WKHU)LQDQFLDO,QVWLWXWLRQV 6HFXULWLHVVROGXQGHU5HSXUFKDVH$JUHHPHQWV 2WKHU/LDELOLWLHV &DSLWDO 5HVHUYH 727$/
)RUHLJQ/LDELOLWLHV
Provisional Data
SHUFHQWIRU7KLVFRPSDUHVZLWKWKHLQFUHDVH Securities Purchased with a View for Resale during the RI SHUFHQWLQZKLFKRFFXUUHGLQDFRQWH[W UHYLHZSHULRGZDVLQDFFRUGDQFHZLWK%2-¶VUHTXLUHPHQW of an increase in foreign currency liabilities resulting for the institutions to effect a separation of managed from the relative instability within the foreign exchange IXQGVIURPWKHLUFRUHGHSRVLWWDNLQJRSHUDWLRQV PDUNHWGXULQJWKDWSHULRG Growth in the asset base was concentrated in the 7KHUH ZDV D SHU FHQW FRQWUDFWLRQLQ WKH HQWLWLHV¶ ),$V¶ KROGLQJV RI IRUHLJQ DVVHWV ZKLFK H[SDQGHG E\ holdings of Securities Purchased with a View for Resale SHU FHQW 7KLV FRQWUDVWV ZLWK WKH SUHYLRXV \HDU GXULQJ WKH UHYLHZ \HDU7KLV ZDV LQ VKDUS FRQWUDVWWR in which domestic currency assets dominated the JURZWKRISHUFHQWGXULQJ7KLVIDOORIILQ LQFUHDVHLQDVVHWV7KHVLJQL¿FDQWH[SDQVLRQLQIRUHLJQ
The Financial System 24 Annual Report 2004
currency assets was dominated by holdings of Jamaica 'XULQJWKH),$V¶FDSLWDOEDVHH[SDQGHGE\ *RYHUQPHQW DQG RWKHU ¿QDQFLDO FXUUHQF\ VHFXULWLHV SHUFHQWUHODWLYHWRWKHSHUFHQWLQFUHDVHUHFRUGHG ZKLFK H[SDQGHG E\ SHU FHQW DQG SHU FHQW GXULQJ WKH SUHYLRXV \HDU 7KLV H[SDQVLRQ ODUJHO\ UHVSHFWLYHO\ 7KH LQFUHDVH LQ IRUHLJQ DVVHWV GXULQJ UHÀHFWHG LQFUHDVHV LQ WKH HQWLWLHV¶ Other Reserves of the review period occurred in the context of relative PLOOLRQ DQG DOVR WKHLU UHWDLQHG HDUQLQJV RI VWDELOLW\LQWKHIRUHLJQH[FKDQJHPDUNHW PLOOLRQ
There was notable growth in Borrowings from Other 2.4.1.2. Sectoral Distribution of Loans Financial Institutions RI SHU FHQW GXULQJ The stock of loans and advances continued to expand UHODWLYHWRSHUFHQWREVHUYHGLQ7KHGHSRVLW LQLQFUHDVLQJE\SHUFHQWDOEHLWORZHUWKDQ EDVHJUHZE\SHUFHQWLQWKHUHYLHZSHULRGUHODWLYH WKHSHUFHQWH[SDQVLRQREVHUYHGGXULQJ7KH WRWKHUHGXFWLRQRISHUFHQWREVHUYHGLQWKHSUHYLRXV expansion was primarily concentrated in growth of \HDU *URZWK LQ IRUHLJQ FXUUHQF\ OLDELOLWLHV RXWSDFHG that of domestic currency liabilities during the review ORDQVWRWKHSULYDWHVHFWRURIPLOOLRQDVORDQV WRWKHSXEOLFVHFWRUDQGWR¿QDQFLDOLQVWLWXWLRQVGHFOLQHG SHULRGZKLFKLVLQVKDUSFRQWUDVWWRWKHSUHYLRXV\HDU The increase in foreign currency liabilities was largely 3ULYDWHVHFWRUORDQVDFFRXQWHGIRU SHUFHQWRIWKH WRWDOORDQSRUWIROLRDVDWHQG'HFHPEHUYLVjYLV UHÀHFWHGLQDSHUFHQWLQFUHDVHLQERUURZLQJVIURP WKHSHUFHQWSURSRUWLRQREVHUYHGDWHQG RYHUVHDVLQVWLWXWLRQV Table 13 SECTORAL DISTRIBUTION OF LOANS AND ADVANCES OF INSTITUTIONS LICENCED UNDER THE FINANCIAL INSTITUTIONS ACT AT DECEMBER 2003 AND 2004 (J$M)
2003 Share of Annual Change 2004 Share of Annual Change Stock Total (%) in Stock Stock Total (%) in Stock
3XEOLF6HFWRU )LQDQFLDO,QVWLWXWLRQV 3ULYDWH6HFWRU $JULFXOWXUH )LVKLQJ 0LQLQJ 4XDUU\LQJ 0DQXIDFWXULQJ &RQVWUXFWLRQ /DQG'HYHORSPHQW 7UDQVSRUW6WRUDJH &RPPXQLFDWLRQ 7RXULVP 'LVWULEXWLRQ 3URIHVVLRQDO 2WKHU6HUYLFHV 3HUVRQDO1RQ%XVLQHVV/RDQVWR,QGLYLGXDOV (OHFWULFLW\ (QWHUWDLQPHQW 2YHUVHDV5HVLGHQWV 7RWDO
The Financial System Bank of Jamaica
Chart 7: Distribution of Private Sector Loans and Advances
Construction & Land Development was the main 2.4.2. Building Societies EHQH¿FLDU\ RI SULYDWH VHFWRU FUHGLW GXULQJ DFFRXQWLQJIRUSHUFHQWRIWKHLQFUHDVHLQFUHGLW7KLV 'XULQJWKHDVVHWVRIWKHEXLOGLQJVRFLHWLHVJUHZ was closely followed by expansion in Distribution and E\SHUFHQWUHODWLYHWRJURZWKRISHUFHQWLQ Transport, Storage & Communication &RQFXUUHQWO\ 7KLV RXWWXUQ ZDV ODUJHO\ UHÀHFWHG LQ LQFUHDVHV Professional & Other ServicesUHFRUGHGVLJQL¿FDQWQHW in Loans & Advances extended by the institutions and UHSD\PHQWVGXULQJUHODWLYHWRWKHUREXVWJURZWK their holdings of Investments. &RQFXUUHQWO\WKHUHZDV REVHUYHGLQ DQRWDEOHLQFUHDVHLQWKHHQWLWLHV¶VDYLQJVIXQGVZKLFK ZDVWKHSULPDU\VRXUFHRIIXQGLQJIRUWKHLURSHUDWLRQV 'HVSLWH QHW UHSD\PHQWV RI ORDQV WR Professional & 'XULQJ WKH UHYLHZ SHULRG WKH QXPEHU RI LQVWLWXWLRQV Other Services and a decline in sectoral share during RSHUDWLQJXQGHUWKH%XLOGLQJ6RFLHWLHV$FWUHPDLQHGDW WKHUHYLHZSHULRGWKLVFDWHJRU\FRQWLQXHGWRDFFRXQW IRXU IRUWKHODUJHVWSURSRUWLRQ SHUFHQW RIRXWVWDQGLQJ SULYDWHVHFWRUFUHGLWConstruction & Land Development Loans & AdvancesH[SDQGHGE\SHUFHQWGXULQJWKH increased its share of outstanding credit to 21 per cent UHYLHZSHULRGUHODWLYHWRSHUFHQWLQ0RUWJDJH DWHQGIURPSHUFHQWDWWKHHQGRIWKHSUHYLRXV ORDQVH[SDQGHGE\SHUFHQWUHODWLYHWRSHUFHQW \HDUDistribution also increased its share of outstanding observed in 2003 and occurred in the context of lower SULYDWH VHFWRU ORDQV WR SHU FHQW DW HQG IURP PRUWJDJHUDWHV&RQFXUUHQWO\WKHUHZDVDSHUFHQW SHUFHQWDWWKHHQGRIZKLOHDOORWKHUVHFWRUV increase in Investments,ZKLFKZDVODUJHO\UHÀHFWHGLQ recorded a decline in their share of private sector credit LQFUHDVHV LQ KROGLQJV RI *2- securities. Other Local (see Chart 7 Securities DOVRUHFRUGHGVLJQL¿FDQWJURZWKGXULQJWKH
The Financial System 26 Annual Report 2004
Table 14
ASSETS AND LIABILITIES OF BUILDING SOCIETIES (J$M)
STOCK STOCK FLOW FLOW Per Cent Per Cent December December Annual Change Annual Change Change Change 2003 2004 2003 2004 2003 2004
$66(76
&DVKDQG%DODQFHVZLWK&RPPHUFLDO%DQNV %DODQFHVZLWK2WKHU)LQDQFLDO,QVWLWXWLRQV %DODQFHVZLWK%DQNRI-DPDLFD ,QYHVWPHQWV QHWRISURYLVLRQ 6HFXULWLHV3XUFKDFHGZLWK9LHZWR5HVDOH /RDQVDQG$GYDQFHV QHWRISURYLVLRQ RIZKLFK0RUWJDJHV $FFRXQWV5HFHLYDEOH )L[HG$VVHWV 2WKHU$VVHWV 727$/
/,$%,/,7,(6 6DYLQJV)XQG 'XHWR%DQNRI-DPDLFD 'XHWR&RPPHUFLDO%DQNV 'XHWR6SHFLDOL]HG,QVWLWXWLRQV 'XHWR2WKHU)LQDQFLDO,QVWLWXWLRQV 6HFXULWLHV6ROG8QGHU5HSXUFKDVH$JUHHPHQW 2WKHU/LDELOLWLHV &DSLWDODQG5HVHUYHV 727$/
,1',&$7,9(5$7,26 3HU&HQW /LTXLG$VVHWV 7RWDO$VVHWV /LTXLG$VVHWV 6DYLQJV)XQG $GYDQFH 6DYLQJV)XQG 0RUWJDJH/RDQV 6DYLQJV)XQG
UHYLHZSHULRGUHÀHFWLQJWKHUHYDOXDWLRQVRIWKHHQWLWLHV¶ RI SHU FHQW LQ 7KH H[SDQVLRQ LQ 6DYLQJV HTXLW\SRUWIROLR )XQGVGXULQJWKHUHYLHZSHULRGZDVODUJHO\UHÀHFWHGLQ DQLQFUHDVHLQVKDUHKROGHU¶VVDYLQJVZKLFKDFFRXQWHG Financing for the growth in the building societies’ assets IRU SHUFHQWRIWKHWRWDOLQFUHDVH7KHFDSLWDOEDVH HPDQDWHGPDLQO\IURPDQ SHUFHQWLQFUHDVHLQWKH UHFRUGHG DQ H[SDQVLRQ RI SHU FHQW GXULQJ HQWLWLHV¶ 6DYLQJV )XQGV FRPSDUHG ZLWK DQ H[SDQVLRQ ZKLFK LQFOXGHG DQ H[SDQVLRQ LQ 2WKHU 5HVHUYHV LQ
The Financial System Bank of Jamaica
Table 15
BUILDING SOCIETIES’ NEW MORTGAGE LOANS 2003 AND 2004
2003 2004 Flow % Change
9DOXHRI1HZ$FFRXQWV -0 5HVLGHQWLDO &RPPHUFLDO $JULFXOWXUDO 2WKHU TOTAL 6 043.5 7 313.4 1 269.9 21.0
1XPEHURI1HZ$FFRXQWV 5HVLGHQWLDO &RPPHUFLDO $JULFXOWXUDO 2WKHU TOTAL 3 121 3 173 52 1.7
2YHUDOO:HLJKWHG$YHUDJH 0RUWJDJH/RDQV5DWH
SDUWLFXODUUHYDOXDWLRQUHVHUYHVZKLFKLQFUHDVHGE\ extended in 2003. This increase was particularly PLOOLRQ UHÀHFWHGLQDSHUFHQWLQFUHDVHLQResidential loans DVWKHUHZDVDSHUFHQWIDOORIILQAgricultural & 7KH DGYDQFH WR VDYLQJV IXQGV UDWLR LQFUHDVHG WR OtherORDQV7KHUHZHUHQHZFRPPHUFLDOPRUWJDJHV SHUFHQWIURP SHUFHQWZLWKWKHPRUWJDJHORDQV H[WHQGHGGXULQJ WRVDYLQJVIXQGVDOVRLQFUHDVLQJE\EDVLVSRLQWVWR SHUFHQWDWHQG7KHUDWLRRIOLTXLGDVVHWVWR 7KHYDOXHRIQHZPRUWJDJHVORDQVLQFUHDVHGE\SHU WRWDODVVHWVIHOOE\EDVLVSRLQWVZKLOHOLTXLGDVVHWV FHQWGXULQJIROORZLQJWKHSHUFHQWLQFUHDVH WRVDYLQJVIXQGGHFOLQHGE\EDVLVSRLQWVGXULQJWKH LQ7KHDYHUDJHVL]HRIQHZPRUWJDJHVLQFUHDVHG UHYLHZSHULRG WRPLOOLRQDWHQGUHODWLYHWR PLOOLRQDW WKHHQGRI1HZResidential mortgages continued 2.4.2.1. New Mortgage Loans WRDFFRXQWIRUWKHJUHDWHVWVKDUH SHUFHQW RIWKH increase in the value of new mortgage loans during 'XULQJ EXLOGLQJ VRFLHWLHV H[WHQGHG QHZ WKH UHYLHZ SHULRG Commercial mortgages increased PRUWJDJH ORDQV PDUJLQDOO\ KLJKHU WKDQ WKH VLJQL¿FDQWO\ E\ SHU FHQW ZKLOH Agricultural
The Financial System 28 Annual Report 2004
& Other mortgages recorded net repayments during 2.5. Development Banks 2.5.1. Development Bank of Jamaica
The weighted average mortgage loan rate of building 7KH 'HYHORSPHQW %DQN RI -DPDLFD '%- FRQWLQXHG VRFLHWLHV GHFOLQHG E\ EDVLV SRLQWV LQ $ WR SURYLGH ¿QDQFLQJ HVSHFLDOO\ IRU SURMHFWV DLPHG continued decline in the mortgage rates coupled with an at generating foreign exchange or promoting import LQFUHDVHZLWKMRLQWOHQGLQJZLWKWKH1DWLRQDO+RXVLQJ VXEVWLWXWLRQ $FFHVV WR IXQGLQJ IURP WKH '%- ZDV 7UXVW 1+7 VKRXOG VHUYH WR VXVWDLQ WKH GHPDQG IRU JHQHUDOO\IDFLOLWDWHGE\$SSURYHG)LQDQFLDO,QVWLWXWLRQV UHVLGHQWLDOKRXVLQJ $),V ZKLFKLQFOXGHFRPPHUFLDODQGPHUFKDQWEDQNV DQG3HRSOH¶V&RRSHUDWLYH 3& EDQNV7KH'%-DOVR %XLOGLQJ6RFLHWLHVFRQWLQXHGWRPDLQWDLQYHU\DJJUHVVLYH FRQWLQXHGWRRUJDQL]H¿QDQFLQJIRUVHYHUDO*RYHUQPHQW marketing campaigns utilizing various promotional and RI -DPDLFD *2- SURJUDPPHV 7KLV SDUWLFLSDWLRQ market segmentation strategies to increase mortgage UHPDLQHG D PDMRU LQÀXHQFH RQ WKH LQVWLWXWLRQ¶V DVVHW OHQGLQJ)LUVWWLPHKRPHRZQHUVZHUHVSHFLDOO\WDUJHWHG EDVH DV DPRXQWV RQOHQW IRU *2- LQIUDVWUXFWXUDO ZLWKRIIHUVRISUHIHUHQWLDOUDWHV programmes FRPSULVHGSHUFHQWRIWRWDODVVHWV7KH
Table 16
DEVELOPMENT BANK OF JAMAICA ASSETS AND LIABILITIES (J$M)
ASSETS 2003 2004 Change %Change &DVKDQG%DQN%DODQFHV 5HFHLYDEOHVDQG3UHSD\PHQWV ,QYHVWPHQWV 6HFXULWLHV5HVDOH$JUHHPHQWV /RDQVWR)LQDQFLDO,QVWLWXWLRQV /RDQVWR3HRSOH¶V&RRSHUDWLYH%DQNV /RDQVWR$),V 2WKHU/RDQV *2-,QIUDVWUXFWXUDO/RDQ3URJUDPPHV )L[HG$VVHWV 2WKHU$VVHWV TOTAL 25365.6 24362.7 -1002.9 -4.0
LIABILITIES AND SHAREHOLDERS’ EQUITY
6KDUHKROGHU¶V(TXLW\ &XUUHQW/LDELOLWLHV /RQJWHUP/LDELOLWLHV 6KRUWWHUP/LDELOLWLHV 2WKHU/LDELOLWLHV TOTAL 25365.6 24362.7 -1002.9 -4.0
The Financial System Bank of Jamaica
'%-UHFRUGHGSUR¿WVRIPLOOLRQIRUWKHFDOHQGDU WKH \HDU 7KLV GHFOLQH UHÀHFWHG WKH UHFODVVL¿FDWLRQ RI \HDUZKLFKZDV SHUFHQWEHORZWKHSHUIRUPDQFH VRPHRIWKH'%-¶VORQJWHUPREOLJDWLRQVWRµ&XUUHQW¶ IRU Loan approvals and disbursements for 2004 are 7KH DVVHWV RI WKH '%- GHFOLQHG E\ ELOOLRQ RU presented in Table 17 and Table 182IWKHELOOLRQ SHU FHQW GXULQJ see Table 16) 7KLV ZDV ORFDOFXUUHQF\ORDQVDSSURYHGSHUFHQWIHOOXQGHU UHÀHFWHGLQDGHFOLQHLQORDQVRXWVWDQGLQJIRU*2-/RDQ WKHµ$JUR,QGXVWU\¶FDWHJRU\ZKLOHVHUYLFHVLQFOXVLYH ,QIUDVWUXFWXUH SURJUDPPHV D IDOORII LQ µ5HFHLYDEOHV RI µ7RXULVP¶ DFFRXQWHG IRU D IXUWKHU SHU FHQW DQG3UHSD\PHQWV¶DQGORZHUµ&DVKDQG%DQNEDODQFHV¶ 1R IRUHLJQ FXUUHQF\ ORDQV ZHUH DSSURYHG GXULQJ WKH RI ELOOLRQ PLOOLRQ DQG PLOOLRQ UHYLHZ SHULRG +RZHYHU GLVEXUVHPHQWV IURP SULRU UHVSHFWLYHO\7KHGHFOLQHLQWKH*2-/RDQ,QIUDVWUXFWXUH \HDUDSSURYDOVDPRXQWHGWRPLOOLRQ:LWKUHVSHFW FDWHJRU\ ODUJHO\ UHÀHFWHG UHSD\PHQW RI SRUWLRQV RI WR ORFDO FXUUHQF\ GLVEXUVHPHQWV WKH µ0DQXIDFWXULQJ¶ ORDQVLVVXHGXQGHUWKHQDWLRQDOURDGZRUNSURJUDPPHV FDWHJRU\DFFRXQWHGIRUDVLJQL¿FDQWSHUFHQWRIWKH 7KHUHZDVKRZHYHUDSHUFHQWLQFUHDVHLQµ/RDQV DPRXQWVSURYLGHG7KHµ7RXULVP¶DQGµ$JUR,QGXVWU\¶ WR)LQDQFLDO,QVWLWXWLRQV¶GXULQJWKH\HDUZKLFKODUJHO\ FDWHJRULHVDOVRDFFRXQWHGIRUVLJQL¿FDQWVKDUHVRIWKH UHÀHFWHGDPLOOLRQRUSHUFHQWLQFUHDVHLQ WRWDOVORDQVGLVEXUVHG ORDQVPDGHWR$),V
:LWK UHVSHFW WR OLDELOLWLHV DQG VKDUHKROGHU¶V HTXLW\ JURZWKZDVUHÀHFWHGLQDOOFDWHJRULHVH[FHSWIRUµ/RQJ WHUP/LDELOLWLHV¶ZKLFKGHFOLQHGE\ SHUFHQWIRU
Table 17 Table 18 LOAN APPROVALS TO AFIS AND PC BANKS BY SECTOR /2$1',6%856(0(17672$),6$1'3&%$1.6%<6(&725 JANUARY -DECEMBER 2004 -$18$5<'(&(0%(5 Local Foreign Local Foreign Currency Currency Currency Currency J$MN % US$MN % J$MN % US$MN % Sector Sector $JULFXOWXUH 00 $JULFXOWXUH $JUR,QGXVWU\ 00 $JUR,QGXVWU\ Manufacturing 00 Manufacturing Mining & Quarrying 00 Mining & Quarrying 2WKHU6HUYLFHV 00 2WKHU6HUYLFHV Tourism 00 Tourism Total Total
The Financial System 30 Annual Report 2004
2.5.2. National Export-Import Bank of +RZHYHUXWLOL]DWLRQRIWKHIDFLOLW\GLGQRWPHHW Jamaica Limited the target at year-end because of a trade impasse that developed between one of the major exporters and the 2.5.2.1. Introduction &XEDQDXWKRULWLHV7KH([,P%DQNVRXJKWWRUHVROYH 7KH1DWLRQDO([SRUW,PSRUW%DQNRI-DPDLFD ([,P the impasse by liaising with its Cuban counterparts and %DQN UHFRUGHGXQDXGLWHGQHWSUR¿WVRIPLOOLRQ relevant Government Ministries in order to facilitate the LQ 7KLV RXWWXUQ ZDV DFKLHYHG QRWZLWKVWDQGLQJ UHVXPSWLRQRIKLJKOHYHOVRIH[SRUWVWR&XED challenges arising from competition brought on by globalization and the imminent removal of special and 2.5.2.2. Loan Disbursements GLIIHUHQWLDOWUDGHSURWHFWLRQPHDVXUHV Total foreign and local currency loan disbursement ZDVELOOLRQSHUFHQWORZHUWKDQWKHDPRXQW The institution’s operations were guided by the GLVEXUVHGLQ7KLVZDVDWWULEXWHGSULPDULO\WRDIDOO REMHFWLYHVVHWRXWLQLWVPHGLXPWHUP6WUDWHJLF3ODQWKDW LQGHPDQGIRUORDQ¿QDQFLQJSDUWLFXODUO\E\WKHSXEOLF requires greater collaboration and deeper involvement sector and the dislocation of productive activities after ZLWKWKHVHFWRUVLGHQWL¿HGIRUJURZWK7RWKLVHQGWKH WKH SDVVDJH RI +XUULFDQH ,YDQ7KH ([,P %DQN DOVR ([,P%DQNODXQFKHGDQPLOOLRQORDQSURJUDPPH continued to experience increased customer demand IRU WKH ,QIRUPDWLRQ &RPPXQLFDWLRQ DQG 7HFKQRORJ\ for medium-term facilities which exceeded budgeted ,&7 VHFWRULQ0DUFK2IWKLVDPRXQWPLOOLRQ H[SHFWDWLRQV$VDUHVXOWHDUO\LQWKH\HDUWKHUHZDVD ZDVDOORFDWHGIRUVKRUWWHUP¿QDQFLQJWR\RXQJVWDUWXS curtailment until additional funds to facilitate lending HQWUHSUHQHXUVLQWKH,&7VHFWRUDQGWKHUHPDLQLQJ ZHUHVRXUFHG million earmarked as a medium term loan facility for WKHPRUHPDWXUHDQGHVWDEOLVKHG,&7EXVLQHVVHV%\ 2.5.2.3. Local Currency Disbursements WKHHQGRIWKH\HDUWKH([,P%DQNKDGDSSURYHG PLOOLRQWRWKLVVHFWRU $V RXWOLQHG LQ Table 19, total local currency GLVEXUVHPHQWRIDSSUR[LPDWHO\ELOOLRQUHSUHVHQWHG 7KHUHZDVLQFUHDVHGGHPDQGIRU([,P¶VPDMRUPHGLXP DGHFOLQHRIDSSUR[LPDWHO\ SHUFHQWEHORZ7KH WHUPORDQSURJUDPPHVLQSDUWLFXODUWKH0RGHUQL]DWLRQ reduction was due in part to lower demand for the Ex- )XQG IRU ([SRUWHUV 0)( ZKLFK SURYLGHV ¿QDQFLQJ ,P%DQN¶VVKRUWWHUPORDQIDFLOLWLHVVXFKDVWKH%DQNHUV for capital acquisition for factory upgrading and ([SRUW &UHGLW )DFLOLW\ %(&) DQG WKH ([SRUW &UHGLW UHWRROLQJ7RDXJPHQWLWVVXSSRUWIRUWKLVDUHDWKH([ )DFLOLW\ (&) DV WKHUH ZHUH IHZHU UHSHDW EXVLQHVV ,P%DQNVHFXUHG86PLOOLRQIURPWKH*RYHUQPHQWRI GHDOVWKDQLQWKHSUHYLRXV\HDU7KHSHULRGRIKLDWXV -DPDLFD-DPDLFD([SRUWHUV¶$VVRFLDWLRQ([SRUW*URZWK which the medium term loan portfolio experienced in ,QLWLDWLYH/RDQ3URJUDPPH7KHXWLOL]DWLRQRIWKH&XEDQ WKHHDUOLHUSDUWRIWKH\HDUDOVRKDGDQLPSDFWRQWKH /LQHRI&UHGLWDOVRLQFUHDVHGGXULQJWKH¿UVWTXDUWHURI RYHUDOOGLVEXUVHPHQWRIORFDOFXUUHQF\ORDQV
The Financial System 31 Bank of Jamaica
Table 19 LOCAL CURRENCY DISBURSEMENTS (J$MN)
% 2003 2004 Change Change Facilities
Bankers Export Credit Facility
Export Credit Facility
,QVXUDQFH3ROLF\'LVFRXQWLQJ)DFLOLW\
3UH6KLSPHQW&R3DFN)DFLOLWLHV
$SSDUHO6HFWRU)LQDQFLQJ
Modernization Fund for Exporters
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Total 2,018.1 1,831.7 -186.3 -9.2
GLVEXUVHPHQW +RZHYHU WKLV ZDV EHORZ WKH OHYHO 2.5.2.4. Approved Local Currency Loans by Industry DQG VKDUH RI GLVEXUVHPHQW DFKLHYHG LQ 7KH reductions represent loss of market share in the very $VLQGLFDWHGLQTable 20EHORZWKH)RRGDQG%HYHUDJH competitive environment of the food and beverages VHFWRUZDVWKHPDMRUXVHURIWKHVKRUWWHUPIDFLOLWLHV PDUNHWRYHUVHDV accessing approximately 61 per cent of total loan
The Financial System 32 Annual Report 2004
Table 20
APPROVED LOANS BY INDUSTRY
2003 2004
Industries J$M Share (%) J$M Share (%) $JUR3URFHVVLQJ Food & Beverage 7H[WLOH $SSDUHO 2WKHU0DQXIDFWXULQJ Mining -- 'LVWULEXWLRQ6HUYLFHV 100.0 Total 2,018.0 100.00 1831.7
Table 21
FOREIGN CURRENCY DISBURSEMENTS
2003 2004
Change % Facilities US$M US$M US$M Change
Lines of Credit Bankers Export Credit Facility Total 13.0 9.5 -3.5 -26.9
2.5.2.5. Foreign Currency Disbursements 7KH ([,P %DQN LQWHQGV WR EURDGHQ WKH VFRSH RI SRVVLEOHQHZDUHDVRI¿QDQFLQJLQ7RWKLVHQGWKH )RUHLJQFXUUHQF\ORDQGLVEXUVHPHQWLQZDV86 IHDVLELOLW\RISURYLGLQJ¿QDQFLQJWRWKH7RXULVP6HFWRU PLOOLRQ FRPSDUHG ZLWK 86 PLOOLRQ LQ see as well as to companies with linkages to the Bauxite and Table 21 7KLV UHGXFWLRQ ZDV GXH WR WKH FRPELQHG $OXPLQD6HFWRULVEHLQJH[SORUHG7KHVHVHFWRUVKDYH effect of reduced utilization under the Cuban Line of EHHQKLJKOLJKWHGDVKDYLQJWKHSRWHQWLDOIRUVLJQL¿FDQW &UHGLWDQGORZHUXVDJHE\WKHSXEOLFVHFWRU JURZWK
The Financial System 33 3. Financial Market Operations
3.1. Money Market Operations SHULRGWKHSHUVLVWHQFHRIUHODWLYHVWDELOLW\LQWKHIRUHLJQ 3.1.1. Bank of Jamaica Operations H[FKDQJHPDUNHWLQÀXHQFHGDGHPRQVWUDWHGSUHIHUHQFH IRU-DPDLFD'ROODULQVWUXPHQWV,QWKLVUHJDUGWKHUHZDV XULQJ PRQHWDU\ SROLF\ IRFXVVHG RQ a shift in the composition of investors’ portfolio as was creating the macroeconomic environment UHÀHFWHGLQWKHFRQYHUVLRQRI86GROODUVIRULQYHVWPHQW 'which would facilitate the lowering of LQ -DPDLFD 'ROODU DVVHWV )XUWKHU LQ DQ HQYLURQPHQW LQÀDWLRQ ,Q WKLV FRQWH[W WKH %DQN FRQWLQXHG WR ZKHUHWKH*RYHUQPHQWRI-DPDLFD *2- QHWUHGHHPHG PDQDJH-DPDLFD'ROODUOLTXLGLW\WKURXJKRSHQPDUNHW GRPHVWLF LQVWUXPHQWV LQYHVWRUV EHFDPH LQFUHDVLQJO\ RSHUDWLRQV 202V ZKLFK ZDV FRQGXFWHG PDLQO\ DWWUDFWHGWR%2-¶VRSHQPDUNHWLQVWUXPHQWV$VVXFK WKURXJK 3ULPDU\ 'HDOHUV 3'V 7KHVH LQVWLWXWLRQV WKH %2- QHW SXUFKDVHG IRUHLJQ FXUUHQF\ RI -DPDLFD DFFRXQWHGIRUDSSUR[LPDWHO\ SHUFHQWRIWKHQHZ 'ROODU HTXLYDOHQW PLOOLRQ7KLV FRQWULEXWHG RSHQPDUNHW RSHUDWLRQV DJUHHPHQWV LQ 7KH WRDQLQFUHDVHRI86 PLOOLRQLQWKH1,5EHWZHHQ QXPEHURI3'VZDVUHGXFHGWRDWHQGIURP HQG'HFHPEHUDQGHQG-XQH DWWKHHQGRI4 While stability persisted during the second half of the The Bank’s liquidity management resulted in a net \HDU WKH VKRFN LQ 6HSWHPEHU DULVLQJ IURP +XUULFDQH DEVRUSWLRQ RI PLOOLRQ LQ DQG ZDV ,YDQUHVXOWHGLQH[WUDRUGLQDU\OLTXLGLW\UHTXLUHPHQWV ODUJHO\UHÀHFWLYHRIWKHDEVRUSWLRQRIPLOOLRQ which was followed by the seasonal currency demand LQWKH¿UVWKDOIRIWKH\HDU see Table 22 'XULQJWKLV LQ 'HFHPEHU +RZHYHU WKHUH ZDV D GHOLEHUDWH
Table 22
BANK OF JAMAICA OPEN MARKET OPERATIONS 2004 (J$MN)
Q1 Q2 Q3 Q4 Total 1HW2XWULJKW6DOHV 3XUFKDVHV 1HW5HYHUVH5HSXUFKDVH
1HW$EVRUSWLRQ ,QMHFWLRQ
Data include principal and interest payments
4 The reduction arose from the merger of two institutions and the temporary disruption in trading with the other institution given the delayed completion of administrative arrangements as stipulated by the regulatory authority. 34 Annual Report 2004
SURJUDPPLQJ RI 202 PDWXULWLHV E\ LQVWLWXWLRQV WR ,QYHVWPHQW 'HEHQWXUHV VL[ ,QYHVWPHQW %RQGV FRLQFLGH ZLWK FXUUHQF\ QHHGV OHDGLQJ WR D YLUWXDO IRXU /RFDO5HJLVWHUHG6WRFNVWKUHH 5HJLVWHUHG UROORYHURI202PDWXULWLHVGXULQJWKHSHULRG2IQRWH %RQGVDQGWZR 86GROODUGHQRPLQDWHGERQGV see WKH *RYHUQPHQW¶V GRPHVWLF ¿QDQFLDO UHTXLUHPHQWV Table 23 ZHUHQRWVLJQL¿FDQWHQRXJKWRDIIHFWWKHSDWWHUQRIRSHQ Domestic Public Issues PDUNHWWUDGLQJ
3.1.2. Government Activities :KLOH WKH GHEW PDQDJHPHQW VWUDWHJ\ IRU )<
7KH %DQN FRQWLQXHG WR DFW DV ¿VFDO DJHQW IRU WKH VSRNH WR H[WHQGLQJ WKH PDWXULW\ SUR¿OH RI GRPHVWLF *RYHUQPHQW¶V SXEOLFO\ LVVXHG SULPDU\ RIIHUV ,Q WKDW GHEWWKHUHZDVFRQWLQXHGVWURQJGHPDQGIRUVKRUWWR UHJDUGWKH%2-H[HFXWHGIRUW\IRXU GHEWLVVXHVLQ PHGLXPWHUP LQVWUXPHQWV &RQVHTXHQWO\ WKH VWRFN UHODWLYH WR IRUW\ LQ 7KH *2- LVVXHV of short-term to medium-term instruments (tenors up FRPSULVHG QLQHWHHQ 7UHDVXU\ %LOOV WHQ WR\HDUV LQFUHDVHGE\DSSUR[LPDWHO\ SHUFHQWin Table 23
COMPARATIVE PROFILE OF GOJ PUBLIC OFFERS - 2003/2004 Quarter 2003 2004
Number of Offers
Tenor <=1 year 1-5 years >5 years Total <=1 year 1-5 years >5 years Total
0DUFK ,QYHVWPHQW'HEHQWXUH 9DULDEOH5DWH,QYHVWPHQW%RQG 86,QGH[HG%RQG Treasury Bill 2 - - 2 4 - - 4 Eurobond - - - 0 - 2 - 2
-XQH ,QYHVWPHQW'HEHQWXUH 9DULDEOH5DWH,QYHVWPHQW%RQG 86,QGH[HG%RQG 7UHDVXU\%LOO /RFDO5HJLVWHUHG6WRFN )L[HG5DWH5HJLVWHUHG%RQG Eurobond 0 - - 1 1
6HSWHPEHU ,QYHVWPHQW'HEHQWXUH 9DULDEOH5DWH,QYHVWPHQW%RQG 86,QGH[HG%RQG 7UHDVXU\%LOO /RFDO5HJLVWHUHG6WRFN )586%RQG )L[HG5DWH5HJLVWHUHG%RQG Eurobond - - - 0 - - 1 1
'HFHPEHU ,QYHVWPHQW'HEHQWXUH 9DULDEOH5DWH,QYHVWPHQW%RQG 86,QGH[HG%RQG 7UHDVXU\%LOO /RFDO5HJLVWHUHG6WRFN Eurobond - 1 - 1 - - 1 1
Total 16 23 2 41 19 23 7 49 Financial Market Operations Bank of Jamaica
UHODWLYHWRZKLOHWKHVWRFNRILQVWUXPHQWV Foreign Debt Issues ZLWK WHQRUV LQ H[FHVV RI \HDUV UHPDLQHG IDLUO\ ÀDW The issuance of two instruments with a tenor above ,Q -DQXDU\ WKH *RYHUQPHQW UHWXUQHG WR VL[\HDUVVDZIDLUO\ORZVXEVFULSWLRQVDQGUHÀHFWHGWKH LQWHUQDWLRQDO¿QDQFLDOPDUNHWVIRUWKH¿UVWWLPHVLQFH SUHIHUHQFH IRU VKRUWHU WHQRU LQVWUXPHQWV 6XEVHTXHQW June 2002)RUWKH\HDUWKH*RYHUQPHQWUDLVHG¼ WRWKHVHLVVXHVWKH*2-LQFUHDVHGLWVRIIHUVRIVKRUW PLOOLRQIURPWKHLVVXHRIWKUHH (XURERQGV86 WHUPLQVWUXPHQWVDVRIWKHUHJLVWHUHGLQVWUXPHQWV PLOOLRQIURPWKHUHRSHQLQJRI*2-*OREDO%RQG offered in the domestic market for the remainder of the DQG86PLOOLRQIURPDUHJLRQDOERQG7KH(XUR \HDUKDGWHQRUVUDQJLQJIURP\HDUWR\HDUV denominated bonds were issued at successively longer WHQRUV RI ¿YH \HDUV HLJKW \HDUV DQG WHQ The Government reduced the exposure of the domestic \HDUV7KHVHLQVWUXPHQWVKDG\LHOGVUDQJLQJIURP debt portfolio to exchange rate risk through the non- SHUFHQWRQWKH¿YH\HDULQVWUXPHQWWRSHUFHQWRQ LVVXDQFHRIWKUHH 86GROODU,QGH[HG%RQGVZKLFK the eight-year bond (see Table 24 PDWXUHGGXULQJWKH\HDU$VVXFKWKHVWRFNRIGRPHVWLF FXUUHQF\GHEWLQGH[HGWRRUGHQRPLQDWHGLQ86GROODUV ,Q)HEUXDU\6WDQGDUGDQG3RRU¶VGRZQJUDGHG-DPDLFD¶V ZDVUHGXFHGWR ELOOLRQIURP ELOOLRQ ORQJWHUPORFDOFXUUHQF\VRYHUHLJQGHEWIURPµ%¶WRµ%¶
7KH VWRFN RI7UHDVXU\ %LOOV GHFOLQHG WR ELOOLRQ and revised the country’s long-term sovereign outlook DW HQG IURP ELOOLRQ DW HQG $V LQ IURPVWDEOHWRQHJDWLYH+RZHYHUVXEVHTXHQWWRWKDW SUHYLRXV \HDUV WKH PRQWK LQVWUXPHQW ZDV WKH PRVW with improvements in the country’s macroeconomic frequently issued tenor and was offered at the end of RXWORRNWKH*2-ZDVDEOHWRUDLVH86PLOOLRQ HDFKPRQWKWRUHSODFHPDWXULQJELOOV7KHDYHUDJH\LHOG DQG ¼ PLOOLRQ RQ WKH LQWHUQDWLRQDO FDSLWDO on this tenor represents the benchmark for re-pricing PDUNHW :LWK LQFUHDVHG LQYHVWRU FRQ¿GHQFH DQG WKH *2-LQVWUXPHQWV,QDGGLWLRQWKHUHZHUHIRXUPRQWK *RYHUQPHQW¶VVWDWHGFRPPLWPHQWWRDFKLHYHLWV¿VFDO LVVXHVWZR\HDULVVXHVDQGRQH PRQWKLVVXH WDUJHWV 6WDQGDUG DQG 3RRU¶V UHYLVHG LWV RXWORRN RQ
Table 24
GOJ EUROBONDS
Quarter Tenor (years) Amount (MN) Coupon (%) Yield to Maturity at Time of Issue(%)
0DUFK ¼ ³ 86 -XQH 86 6HSWHPEHU ¼ 'HFHPEHU ¼ *GOJ 2017 was re-opened on 17 April 2004. Consequently, the nominal value of bonds outstanding on this instrument is US$425MN
5US$50 million was raised on the regional capital market in 2003 Financial Market Operations 36 Annual Report 2004
the long-term sovereign credit rating on Jamaica from DWDQDFFHOHUDWHGSDFHGXULQJWKH¿UVWKDOIRIWKH\HDUEXW QHJDWLYH WR VWDEOH EXW DI¿UPHG LWV µ%¶ UDWLQJ RQ *2- VORZHGGXULQJWKHVHFRQGKDOI7KHDGMXVWPHQWVLQWKH VKRUWWHUPDQGORQJWHUPERQGVLQ'HFHPEHU ODWWHUKDOIUHÀHFWHGFRQFHUQVUHJDUGLQJWKHLQÀDWLRQDU\ impact of increases in world oil prices and the passage of $VWURQJGHPDQGIRU*2-(XURERQGVZDVHYLGHQWLQWKH +XUULFDQHV&KDUOH\DQG,YDQLQWKH6HSWHPEHUTXDUWHU UHRSHQLQJRI*2-*OREDO%RQGLQ$SULOZKLFK UDLVHG DQ DGGLWLRQDO 86 PLOOLRQ EULQJLQJ WKH 'XULQJ WKH ¿UVW KDOI RI WKH ¿QDQFLDO PDUNHWV WRWDO RXWVWDQGLQJ RQ WKLV ERQG WR 86 PLOOLRQ6 UHPDLQHG UHODWLYHO\ VWDEOH SURYLGLQJ VHYHUDO $GGLWLRQDOO\LQ-XO\WKHVL]HRIWKHRIIHURQWKH\HDU opportunities for the Bank to reduce interest rates WHQRUZDVLQFUHDVHGWR¼PLOOLRQIURPWKHLQLWLDO RQ LWV 202 LQVWUXPHQWV DV ZHOO DV WR QRUPDOL]H WKH ¼ PLOOLRQ RIIHU GXH WR VWURQJ LQYHVWRU GHPDQG yield curve (see Chart 8 ,Q WKDW UHJDUG VLJQL¿FDQW %RUURZLQJ RQ LQWHUQDWLRQDO ¿QDQFLDO PDUNHWV LQ WKH reductions were effected on the rates applicable to the review period culminated with the issue of a 10-year GD\ WR GD\ LQVWUXPHQWV %\ WKH HQG RI WKH (XURERQGRQ2FWREHU7KLVLQVWUXPHQWUDLVHG 0DUFK TXDUWHU WKH UDWHV RQ WKH GD\ DQG GD\ ¼PLOOLRQDWDFRXSRQRISHUFHQWUHSUHVHQWLQJ instruments were reduced by 5.00 and 5.05 percentage DGHFOLQHRIEDVLVSRLQWVUHODWLYHWRWKHFRXSRQRIIHUHG SRLQWVUHVSHFWLYHO\IURP21.0 per cent and 23.0 per cent on the 8-year tenor in July (see Table 24 RQ WKH UHVSHFWLYH LQVWUXPHQWV DW HQG'HFHPEHU )ROORZLQJ WKHVH UHGXFWLRQV PDUJLQDO DGMXVWPHQWV RI 3.1.3. Interest Rates 0.95 of a percentage point and 1.55 percentage points RQWKHUHVSHFWLYHLQVWUXPHQWVZHUHHIIHFWHGWRUHÀHFW 7KURXJKRXW WKH \HDU IDYRXUDEOH PDFURHFRQRPLF rates of 15.05 per cent and 16.40SHUFHQWUHVSHFWLYHO\ conditions facilitated a steady decline in domestic (see Table 25 7KHVH DGMXVWPHQWV GRQH RQ 0D\ LQWHUHVWUDWHV,QSDUWLFXODUWKHDGMXVWPHQWVZHUHHIIHFWHG Chart 8 BOJ’s Yield Curve (End-Period)
6 These bonds were initially issued in June 2002 Financial Market Operations Bank of Jamaica
ZHUHWKHVROHUHGXFWLRQVIRUWKH-XQHTXDUWHUDV ,QDVLPLODUYHLQPDUNHWGHWHUPLQHGUDWHVH[KLELWHGD instability that emerged in the foreign exchange market declining trend as the weighted average yield on the LQPLG0D\SUHYHQWHGIXUWKHUUHGXFWLRQV *2-¶VPRQWK7UHDVXU\%LOOGHFOLQHGWR15.57 per cent E\0DUFKUHODWLYHWR22.05SHUFHQWLQ'HFHPEHU 'XULQJWKHVHFRQGKDOIRIWKH%DQNUHGXFHGWKH 2003 (see Table 26 7KHUDWHRIGHFOLQHLQWKH-XQH magnitude and the frequency of interest rate adjustments 6HSWHPEHU DQG 'HFHPEHU TXDUWHUV ZDV VLJQL¿FDQWO\ DVFRQFHUQVUHJDUGLQJKLJKHULQÀDWLRQHPHUJHG7KHVH lower with interest rates remaining within a narrow concerns were based on the continued increase in world band around the Bank of Jamaica’s 180-day rate (see RLO SULFHV LQ WKH 6HSWHPEHU TXDUWHU FRXSOHG ZLWK WKH Chart 9 surge in prices of agricultural products in the aftermath RI+XUULFDQH,YDQ7KHPRUHFDXWLRXVVWDQFHDGRSWHGE\ 7KHFRXSRQVRIIHUHGRQPHGLXPWHUP*2-LQVWUXPHQWV WKH%DQNGXULQJ6HSWHPEHUDQG'HFHPEHUTXDUWHUVZDV LVVXHG GXULQJ WKH \HDU DOVR UHÀHFWHG GHFOLQHV$W WKH evidenced by the reduction of 075 of a percentage point EHJLQQLQJ RI WKH 0DUFK TXDUWHU D PRQWK *2- and 090 of a percentage point in rates on the 180-day ,QYHVWPHQW'HEHQWXUHZDVRIIHUHGDWDFRXSRQRI22.125 DQGGD\LQVWUXPHQWVUHVSHFWLYHO\ZKLFKHQGHGWKH per cent relative to 25.0SHUFHQWRQD PRQWKRIIHURI year at 14.30 per cent and 15.30SHUFHQWUHVSHFWLYHO\ DVLPLODULQVWUXPHQWLQ'HFHPEHU7KURXJKRXWWKH The rate on the 30-day was 13.80 per cent at year-end or \HDUORZHUFRXSRQVZHUH offered on these instruments 0.40RIDSHUFHQWDJHSRLQWEHORZWKHUDWHDWHQG-XQH
Table 25
RATES ON OMO INSTRUMENTS (%) (End December 2003 - December 2004)
End Month 30-day 180-day 365-day 'HFHPEHUµ -DQXDU\ )HEUXDU\ 0DUFK $SULO 0D\ -XQH -XO\ $XJXVW 6HSWHPEHU 2FWREHU 1RYHPEHU 'HFHPEHUµ
Financial Market Operations 38 Annual Report 2004
Table 26
Six-Month Treasury Bill Average Yield (%) 2004 (End of Period)
-DQ -XO )HE $XJ 0DU 6HS $SU 2FW 0D\ 1RY -XQ 'HF
Chart 9
DQGE\HQG'HFHPEHUWKHFRXSRQRQDPRQWK debenture was 16.50 SHU FHQW 6LPLODUO\ WKH DYHUDJH \LHOGRQDQDXFWLRQHG\HDU*2-LQVWUXPHQWGHFOLQHG marginally to 17.22 per cent at year-end relative to 17.26SHUFHQWLQWKH-XQHTXDUWHU
Financial Market Operations 4. Supervision Of Deposit -Taking Financial Institutions
4.1. Introduction 4.2. Supervisory Methodology DQN RI -DPDLFD E\ YLUWXH RI SURYLVLRQV The supervisory methodology that has been traditionally FRQWDLQHG LQ 6HFWLRQ $ RI WKH %DQN RI applied combines annual on-site examinations with -DPDLFD$FWLVFKDUJHGZLWKWKHVXSHUYLVLRQ B RQJRLQJRIIVLWHPRQLWRULQJZKLFKDOORZVIRUFRQWLQXRXV DQG SHULRGLF H[DPLQDWLRQ RI GHSRVLWWDNLQJ ¿QDQFLDO and timely review of developments in the V\VWHPDQG LQVWLWXWLRQV7KHGHSRVLWWDNLQJVHFWRURIWKH¿QDQFLDO WKHFRQGLWLRQRIWKHVXSHUYLVHGLQVWLWXWLRQV V\VWHPFDQEHJURXSHGLQWRWKUHHVXEVHFWRUV
x Commercial banks licensed under the Banking 2QVLWHH[DPLQDWLRQLQYROYHVDUHYLHZDQGDVVHVVPHQWRI $FW NH\DUHDVRIDOLFHQVHH¶VRSHUDWLRQVLQSDUWLFXODUFDSLWDO x Merchant Banks licensed under the Financial DGHTXDF\DVVHWTXDOLW\OLTXLGLW\HDUQLQJVSHUIRUPDQFH ,QVWLWXWLRQV$FW management oversight and the overall risk management ),$OLFHQVHHV framework within which the institution operates as it x %XLOGLQJ 6RFLHWLHV JRYHUQHG E\ WKH %XLOGLQJ UHODWHVWRRSHUDWLRQDODUHDVDVZHOODVLWVDQWLPRQH\ 6RFLHWLHV$FW DQG %DQN RI -DPDLFD %XLOGLQJ ODXQGHULQJDQGDQWLWHUURULVP¿QDQFLQJDUUDQJHPHQWV 6RFLHWLHV 5HJXODWLRQV 2QHVXFKH[DPLQDWLRQLVFRQGXFWHGDQQXDOO\IRUHDFK licensee as required by statute or more frequently if $GGLWLRQDOO\FUHGLWXQLRQVKDYHEHHQGHVLJQDWHGE\WKH GHHPHG QHFHVVDU\ E\ WKH 6XSHUYLVRU *HQHUDOO\ WKH 0LQLVWHURI)LQDQFHDVµVSHFL¿HG¿QDQFLDOLQVWLWXWLRQV¶ examination focus is on evaluating the quality and XQGHUWKH%DQNRI-DPDLFD$FWHQDEOLQJWKH%DQNWR estimated real value of assets as well as the robustness REWDLQ LQIRUPDWLRQ RQ WKHLU RSHUDWLRQV 5HJXODWLRQV RI WKH OLFHQVHH¶V FRUSRUDWH JRYHUQDQFH IUDPHZRUN to establish a formal supervisory framework for these This is effected through physical inspection of the entities have been drafted after extensive discussions entities’ records and documents and interviews with ZLWKVHFWRUUHSUHVHQWDWLYHVDQGDZDLWDSSURYDO VHQLRUPDQDJHPHQWDQGUHOHYDQWRSHUDWLRQVSHUVRQQHO WRLQIRUPWKH¿QDODVVHVVPHQWRIWKHRYHUDOO¿QDQFLDO 5HJXODWRU\ UHVSRQVLELOLW\ IRU QRQGHSRVLW WDNLQJ FRQGLWLRQ ¿QDQFLDO LQVWLWXWLRQV UHVLGHV ZLWK WKH )LQDQFLDO 6HUYLFHV&RPPLVVLRQZKLFKKDVRYHUVLJKWRILQVXUDQFH 2QJRLQJRIIVLWHDVVHVVPHQWVDUHIDFLOLWDWHGE\SUXGHQWLDO FRPSDQLHV VHFXULWLHV GHDOHUV XQLW WUXVWV SHQVLRQ returns which licensees are required to submit to the management companies and mutual funds (see Section %DQNDWVWDWHGLQWHUYDOV PRQWKO\TXDUWHUO\DQQXDOO\ 4.10. Supervisory Cooperation and Interaction DVZHOODVUHYLHZRIDXGLWDQGRWKHUH[WHUQDOUHSRUWV The off-site review involves analysis of the prudential
40 Annual Report 2004
UHWXUQVIRUWUHQGVLQRSHUDWLRQVDQG¿QDQFLDOFRQGLWLRQ7KLV entities as they seek to compete in the domestic and DOVRLQFOXGHVDQµ(DUO\:DUQLQJ6\VWHP¶ZKHUHE\YDULRXV LQWHUQDWLRQDOPDUNHWV,QWKLVUHJDUGWKH%DQNKDVLQUHFHQW ¿QDQFLDO DQG SUXGHQWLDO LQGLFDWRUV DUH PRQLWRUHG DQG years expanded the scope of its on-site review of licensees’ subjected to scenario and stress tests to allow for forward IUDPHZRUNIRU$QWLPRQH\/DXQGHULQJDQG$QWLWHUURULVP looking assessments and facilitate proactive supervisory )LQDQFLQJ $0/7) LQRUGHUWRHQVXUHWKDWVXFKPHDVXUHV UHVSRQVHV )XUWKHU LQ FROODERUDWLRQ ZLWK WKH )LQDQFLDO remain in keeping with heightened international obligations 6WDELOLW\'HSDUWPHQWRIWKH%DQNRI-DPDLFDDIRUHFDVWLQJ XQGHU 8QLWHG 1DWLRQV 81 6HFXULW\ &RXQFLO 5HVROXWLRQV PRGHOKDVEHHQGHYHORSHGWRHQKDQFHSUHGLFWLYHDQDO\VHV and other international standards promulgated by the )LQDQFLDO $FWLRQ 7DVN )RUFH )$7) DQG WKH &DULEEHDQ The off-site surveillance and on-site examination processes )LQDQFLDO$FWLRQ7DVN)RUFH &)$7) RIZKLFK-DPDLFDLV DUH FRPSOHPHQWHG E\ RWKHU VXSHUYLVRU\ WHFKQLTXHV VXFK DPHPEHU as reviewing compliance with legal requirements and SUXGHQWLDOUHJXODWLRQV7KH%DQNRI-DPDLFDDOVRSURYLGHV Feedback from all the Central Bank’s reviews and formal guidance through the dissemination of Best Practice assessments is communicated to licensees’ management by 6WDQGDUGVDQG*XLGHOLQHVDQGSURPRWLQJWKHKLJKHVWGHJUHH PHDQV RI D PL[ RI PHHWLQJV FRUUHVSRQGHQFH DQG ZULWWHQ of disclosure through the Bank’s publication of quarterly UHSRUWV RQ H[DPLQDWLRQ ¿QGLQJV KLJKOLJKWLQJ DQ\ LVVXHV un-audited balance sheet data for each licensee as well as of concern and requiring remedial actions as deemed VHFWRUDQGRYHUDOOV\VWHPWUHQGVLQSUXGHQWLDOLQGLFDWRUV QHFHVVDU\ ZLWKLQ VSHFL¿HG WLPH IUDPHV ,Q LQVWDQFHV RI µXQVDIHDQGXQVRXQG¶SUDFWLFHVWKH%DQNXWLOL]HVVDQFWLRQ The Bank’s supervisory methodologies are constantly being SRZHUVPHDVXUHVDVSURYLGHGXQGHUWKHUHVSHFWLYH¿QDQFLDO upgraded and reshaped to adapt to changes in international legislation and in accordance with its supervisory “Ladder EHVWSUDFWLFHVVXSHUYLVRU\WHFKQLTXHVDQGLQLWLDWLYHVDVZHOO RI(QIRUFHPHQW´ as to respond to changes in the risk appetite of supervised
Supervision of Deposit-Taking Financial Institutions 41 Bank of Jamaica
4.3. Legislative Framework The major pieces of legislation and supporting regulations governing the operations of the licensed deposit taking institutions are shown in Table 27.
Licensees also have statutory responsibilities that may RUPD\QRWEHSHFXOLDUWRWKHLUQDWXUHRIEXVLQHVVZKLFK
Table 27±2YHUYLHZ2I/HJLVODWLYH)UDPHZRUN Type of Legislation Title of Statute Principal Legislation x 7KH%DQNRI-DPDLFD$FW x 7KH%DQNLQJ$FW x 7KH)LQDQFLDO,QVWLWXWLRQV$FW x 7KH%XLOGLQJ6RFLHWLHV$FW x 7KH%DQNRI-DPDLFD %XLOGLQJ6RFLHWLHV 5HJXODWLRQV 6XEVLGLDU\/HJLVODWLRQ x 7KH%XLOGLQJ6RFLHWLHV /LFHQVHV 5HJXODWLRQV x 7KH%DQNLQJ (VWDEOLVKPHQWRI%UDQFKHV 5HJXODWLRQV x 7KH%DQNLQJ $PDOJDPDWLRQDQG7UDQVIHUV 5HJXODWLRQV x 7KH%DQNLQJ &DSLWDO$GHTXDF\ 5HJXODWLRQV 2004 x 7KH%DQNLQJ /LFHQFH)HHV 5HJXODWLRQV x 7KH)LQDQFLDO,QVWLWXWLRQV (VWDEOLVKPHQWRI %UDQFKHV 5HJXODWLRQV x 7KH)LQDQFLDO,QVWLWXWLRQV $PDOJDPDWLRQDQG 7UDQVIHUV 5HJXODWLRQV x 7KH)LQDQFLDO,QVWLWXWLRQV &DSLWDO$GHTXDF\ 5HJXODWLRQV x 7KH)LQDQFLDO,QVWLWXWLRQV /LFHQFH)HHV 5HJXODWLRQV
GHYROYHIURPRWKHUSLHFHVRIOHJLVODWLRQ7KHVHLQFOXGH 3UR¿OH 2I 7KH 6XSHUYLVHG 'HSRVLW EXW DUH QRW OLPLWHG WR WKH &RPSDQLHV $FW DQG WKH Taking System 'HSRVLW,QVXUDQFH$FWWKH'UXJ2IIHQFHV )RUIHLWXUH 'XULQJWKH¿UVWKDOIRIWZRPHUJHUVZKLFKZHUHLQ SURJUHVVDWWKHHQGRIZHUH¿QDOL]HGDVIROORZV RI 3URFHHGV $FW WKH 0RQH\ /DXQGHULQJ $FW DQG *UDFH .HQQHG\ /LPLWHG SDUHQW FRPSDQ\ RI UHODWHG5HJXODWLRQVDQG*XLGDQFH1RWHVLVVXHGE\WKH George and Branday Limited D),$/LFHQVHH 6XSHUYLVRU\$XWKRULW\ see Financial Legislation and First Global Bank D FRPPHUFLDO EDQN consolidated the operations of both deposit- WDNLQJVXEVLGLDULHVHIIHFWLYH$SULOLQWR )LUVW*OREDO%DQN
Supervision of Deposit-Taking Financial Institutions 42 Annual Report 2004
Pan Caribbean Merchant Bank Limited $V D UHVXOW RI WKH PHUJHUV WKH QXPEHU RI VXSHUYLVHG and Manufacturers Sigma Merchant Bank GHSRVLWWDNLQJ LQVWLWXWLRQV H[FOXGLQJ FUHGLW XQLRQV Limited,ERWK),$OLFHQVHHVPHUJHGRSHUDWLRQV FRQWUDFWHGWRDVDWHQG'HFHPEHUIURPDVDW into Pan Caribbean Merchant Bank Limited 'HFHPEHU see Table 28 . as at 1 June 2004 as part of a wider merger involving their respective parent companies Table 280DUNHW&RPSRVLWLRQ±1XPEHURI DQGVXEVLGLDULHV
'HSRVLWWDNLQJ(QWLWLHV Supervised Entities 2000 2001 2002 2003 2004
Commercial Banks 6 6 6 6 6 ),$/LFHQVHHV 11 11 10 %XLOGLQJ6RFLHWLHV 4 44 4 Total 22 21 20 17 15
Table 29±/LFHQVHG'HSRVLW7DNLQJ(QWLWLHVDVDW'HFHPEHU Sub-sector Institution Name Related Deposit-taking Institution
Commercial TKH%DQNRI1RYD6FRWLD-DPDLFD/LPLWHG Scotia Jamaica Building Society Banks &LWLEDQN1$ Citimerchant Bank Limited )LUVW&DULEEHDQ ,QWHUQDWLRQDO %DQN -DPDLFD FirstCaribbean International Building Limited Society First Global Bank Limited 1DWLRQDO&RPPHUFLDO%DQN-DPDLFD/LPLWHG 5%77-DPDLFD/LPLWHG FIA Licensees Capital & Credit Merchant Bank Limited Citimerchant Bank Limited Citibank N. A. '% *0HUFKDQW%DQN/LPLWHG MF&G Trust and Finance Limited Pan Caribbean Merchant Bank Limited Building )LUVW&DULEEHDQ,QWHUQDWLRQDO%XLOGLQJ6RFLHW\ FirstCaribbean International Bank Societies (Jamaica) Limited -DPDLFD1DWLRQDO%XLOGLQJ6RFLHW\ 6FRWLD-DPDLFD%XLOGLQJ6RFLHW\ The Bank of Nova Scotia Jamaica Limited 9LFWRULD0XWXDO%XLOGLQJ6RFLHW\
Supervision of Deposit-Taking Financial Institutions 43 Bank of Jamaica
4.5. System Performance Review 4.5.2. Asset Review 4.5.1. Overview *URZWKLQWKHGHSRVLWWDNLQJVHFWRUPRGHUDWHGWR 7KHV\VWHP¶VDVVHWSUR¿OHFRQWLQXHGWREHGRPLQDWHG SHUFHQWGXULQJUHODWLYHWRSHUFHQWLQ E\LQYHVWPHQWVUHSUHVHQWLQJSHUFHQWRIWRWDODVVHW 7KLV UHÀHFWHG WKH LPSOHPHQWDWLRQ RI ,QWHUQDWLRQDO EDVHPDUJLQDOO\KLJKHUWKDQWKH SHUFHQWDWHQG $FFRXQWLQJ6WDQGDUGV,QWHUQDWLRQDO)LQDQFLDO5HSRUWLQJ 'HFHPEHU2IWRWDOLQYHVWPHQWVDVVHWVDFTXLUHG 6WDQGDUGV ,$6,)56 DV ZHOO DV D VORZHU UDWH RI XQGHU UHSXUFKDVH DJUHHPHQWV DFFRXQWHG IRU SHU FKDQJH LQ WKH H[FKDQJH UDWH $FFRUGLQJO\ LQ FHQWGRZQIURPSHUFHQWDWHQG7KHVWRFN DVVHWV LQFUHDVHG E\ - ELOOLRQ WR - ELOOLRQ RIORDQVUHSUHVHQWHG SHUFHQWRIWRWDODVVHWVXS $VVHWJURZWKFRQWLQXHGWREHLQÀXHQFHGE\WKHIRUHLJQ SURJUHVVLYHO\IURP SHUFHQWDQGSHUFHQWDW FXUUHQF\DVVHWSRUWIROLRZKLFKJUHZE\86ELOOLRQ HQGDQGUHVSHFWLYHO\ ZKLOHFDVKDQGEDQN RU SHU FHQW WR 86 ELOOLRQ DW HQG 'HFHPEHU SODFHPHQWV DFFRXQWHG IRU SHUFHQW RI WRWDO DVVHWV UHODWLYHWRSHUFHQWDWHQG
([SDQVLRQLQDVVHWVZDV¿QDQFHGSULPDULO\E\GHSRVLW 'HSRVLWV UHPDLQHG WKH SULQFLSDO VRXUFH RI IXQGLQJ LQÀRZVRI-ELOOLRQ GRPHVWLFDQGIRUHLJQFXUUHQF\ UHSUHVHQWLQJ SHU FHQW RI DVVHWV DW HQG DQGZDVUHÀHFWHGLQDQLQFUHDVHLQLQYHVWPHQWVRI FRPSDUHG ZLWK SHU FHQW HQG 'HFHPEHU ELOOLRQ ZKLFKLQFOXGHGUHYDOXDWLRQVXQGHU,)56 ORDQV %RUURZLQJVLQFOXGLQJVHFXULWLHVVROGXQGHUUHSXUFKDVH DGYDQFHVRIELOOLRQDQGFDVK EDQNSODFHPHQWV DJUHHPHQWV DQG ERUURZLQJV XQGHU PDUJLQ FRQWUDFWV RIELOOLRQ,)56SULQFLSOHVIRUWKHUHFRJQLWLRQDQG IXQGHGSHUFHQWRIDVVHWVGRZQIURPSHUFHQW PHDVXUHPHQWRI¿QDQFLDOLQVWUXPHQWV ,$6 UHTXLUH DWHQG'HFHPEHU IDLU YDOXH GLIIHUHQWLDOV RQ LQYHVWPHQWV WR EH UHÀHFWHG LQSUR¿WV+RZHYHUWKH%DQNRI-DPDLFDKDVGLUHFWHG $OWKRXJK\LHOGLQJVRPHPDUNHWVKDUHWRRWKHUGHSRVLW DGRSWLRQRIWKHRSWLRQXQGHU,)56IRULWVOLFHQVHHVWR WDNHUV WKH FRPPHUFLDO EDQNV FRQWLQXHG WR EH WKH carry such valuation differences as a reserve pending the SUHGRPLQDQWLQÀXHQFHRQV\VWHPWUHQGVDFFRXQWLQJIRU UHDOL]DWLRQDQGERRNLQJWRSUR¿WVRIWKHVHGLIIHUHQWLDOV over 60 per cent of the growth in assets and controlling XSRQGLVSRVDORIWKHDVVHWV$VDW'HFHPEHUVXFK SHU FHQW RI WKH WRWDO GHSRVLWWDNLQJ VHFWRU DW WKH IDLUYDOXHXQUHDOL]HGUHVHUYHVVWRRGDW ELOOLRQ end of 2004 (see Table 30 %DQN RI 1RYD 6FRWLD DQG 1DWLRQDO &RPPHUFLDO %DQN UHPDLQHG WKH PDUNHW 3UR¿WV ZHUH DIIHFWHG E\ UHGXFHG LQWHUHVW LQFRPH DQG OHDGHUVDQGFRPELQHGDFFRXQWHGIRURYHUSHUFHQWRI ORZHUIRUHLJQH[FKDQJHJDLQV7KHVHHDUQLQJVJHQHUDWHG WRWDOPDUNHWDVVHWV*URZWKLQWKHFRPPHUFLDOEDQNLQJ increased equity with permanent capital growing faster VHFWRU ZDV PDLQO\ ¿QDQFHG IURP LQFUHDVHG GHSRVLWV WKDQ RYHUDOO DVVHW EDVH UHVXOWLQJ LQ VWURQJHU FDSLWDO which facilitated expansion of the loan portfolio and LQGLFDWRUVUHODWLYHWRHQG RYHUVHDVSODFHPHQWV
Supervision of Deposit-Taking Financial Institutions 44 Annual Report 2004
1RWZLWKVWDQGLQJDUHGXFWLRQLQWKHQXPEHURIPDUNHW *RYHUQPHQWRI-DPDLFDGHEWLQVWUXPHQWV3UHYLRXVO\ players (see Table 28 ),$OLFHQVHHVLQFUHDVHGWKHLU apart from Treasury Bills and other instruments VKDUHRIWKHGHSRVLWWDNLQJPDUNHWWRSHUFHQWIURP FDUU\LQJ D VSHFL¿F µOLTXLG DVVHW¶ GHVLJQDWLRQ LQ WKHLU SHUFHQWDWHQG7KHLUDVVHWEDVHJUHZE\ SURVSHFWXV RQO\ /RFDO 5HJLVWHUHG 6WRFN /56 SHUFHQW ELOOLRQ WRWRWDOELOOLRQFRPSDUHG with residual maturities of nine months or less were WRJURZWKRISHUFHQW ELOOLRQ H[SHULHQFHG eligible for inclusion in the statutory liquid assets LQWKHSUHYLRXV\HDU PHDVXUH $FFRUGLQJO\ ERQGV GHEHQWXUHV RU RWKHUV debt instruments issued by the Government of Jamaica Building societies also strengthened their market ZRXOG QRW TXDOLI\ LUUHVSHFWLYH RI UHVLGXDO PDWXULW\ SUHVHQFH DFFRXQWLQJ IRU SHU FHQW RI WKH GHSRVLW 'XULQJ 0DUFK WKH 0LQLVWHU RI )LQDQFH RQ WKH WDNLQJV\VWHP¶VDVVHWVDVDJDLQVWSHUFHQWDWHQG UHFRPPHQGDWLRQRIWKH%DQNRI-DPDLFDGHVLJQDWHGDOO *URZWKLQDVVHWVRIELOOLRQIRUWKHVHFWRU debt securities or instruments issued by the Government FRQWLQXHGWREH¿QDQFHGSULPDULO\IURPQHZVDYLQJVRI of Jamaica (denominated in both domestic and foreign ELOOLRQZKLFKIXQGHGLQWKHPDLQDELOOLRQ FXUUHQF\ ZLWKQLQHPRQWKVRUOHVVWRPDWXULW\HOLJLEOH H[SDQVLRQ RI WKH PRUWJDJH SRUWIROLR $Q LQFUHDVH LQ DV OLTXLG DVVHWV $OO 7UHDVXU\ %LOOV LUUHVSHFWLYH RI WKH DVVHWV RI EXLOGLQJ VRFLHWLHV ZDV DOVR VLJQL¿FDQWO\ PDWXULW\FRQWLQXHWRTXDOLI\DVOLTXLGDVVHWV LQÀXHQFHGE\IDLUYDOXHPHDVXUHPHQWRIOLVWHGHTXLW\ KROGLQJVSULPDULO\DWRQHVRFLHW\ The institutions continued to maintain comfortable margins of liquidity over and above the statutory 4.5.3. Liquidity UHTXLUHPHQWV GXULQJ 7KH UDWLR RI GRPHVWLF 7KH VWDWXWRU\ PLQLPXP &DVK 5HVHUYH DQG /LTXLG currency liquid assets held by licensees to domestic $VVHWV UHTXLUHPHQWV IRU WKH V\VWHP¶V WKUHH VHFWRUV SUHVFULEHG OLDELOLWLHV LQFUHDVHG WR SHU FHQW LQ UHPDLQHGXQFKDQJHGGXULQJ7KHUHZDVKRZHYHU 'HFHPEHU IURP SHU FHQW IRU 'HFHPEHU some widening of eligible liquid assets as a result of 7KH86GROODUOLTXLGDVVHWVUDWLRLQFUHDVHGWR rationalization of the liquid assets treatment for all SHUFHQWLQ'HFHPEHUIURPSHUFHQWIRU 'HFHPEHU Table 30 - Market Share of Deposit-Taking Financial Sub-sectors (Assets*)
December 2002 December 2003 December 2004 J$BN Per cent J$BN Per cent J$BN Per cent Commercial Banks %XLOGLQJ6RFLHWLHV ),$/LFHQVHHV
Total 340.2 100.0 419.1 100.0 471.8 100.0
Assets net of contingent liabilities and provisions for losses
Supervision of Deposit-Taking Financial Institutions Bank of Jamaica
'XULQJ WKH \HDU WKH VWDWXWRU\ UHTXLUHPHQWV IRU HQG$OOWKUHHVHFWRUVUHSRUWHGUHGXFHGGHOLQTXHQFLHV OLTXLG DVVHWV ZHUH VDWLV¿HG WKURXJKRXW E\ DOO EXW RQH LQWKHLUORDQSRUWIROLRVZLWKLQGLYLGXDOLQVWLWXWLRQVDOO OLFHQVHH 7KH EUHDFK UHVXOWHG IURP PLVLQWHUSUHWDWLRQ EHLQJZHOOZLWKLQWKHSUXGHQWLDOWROHUDQFHOLPLWRI of the liquid assets measure and is in the process of SHUFHQW FRUUHFWLRQ 7KHUH ZHUH KRZHYHU D IHZ LQVWDQFHV RI LQIUDFWLRQV RI WKH &DVK 5HVHUYH UDWLR ZKLFK UHVXOWHG 3URYLVLRQVIRUORVVHV DJJUHJDWHRISUXGHQWLDODQG,)56 from either untimely adjustments to monthly Cash GHWHUPLQHGSURYLVLRQLQJ FRQWLQXHG WR RIIHU RYHU 5HVHUYHEDODQFHVRQWKHSDUWRIOLFHQVHHVRULQDFFXUDWH SHU FHQW FRYHUDJH RI WKH GHOLQTXHQW SRUWIROLRV EHLQJ FRPSXWDWLRQVRIUHVHUYDEOHOLDELOLWLHV3HQDOW\FKDUJHV SHUFHQWDWWKHHQGRIXSIURPSHUFHQW pursuant to the relevant statutes were imposed at the DWHQG %DQN¶VHVWDEOLVKHGUDWHVRISHUFHQWSHUDQQXPRQ domestic currency shortfalls and 20 per cent per annum 3UR¿WDELOLW\ RQIRUHLJQFXUUHQF\VKRUWIDOOV 7KH V\VWHP¶V XQDXGLWHG SUHWD[ SUR¿W IRU ZDV 4.5.4. Asset quality ELOOLRQ D FRQWUDFWLRQ RI - ELOOLRQ UHODWLYH WR 7KHVH UHVXOWV SDUWO\ UHÀHFW UHGXFHG LQWHUHVW The deposit taking system continued to register steady income arising from lower interest rates as well as LPSURYHPHQW LQ DVVHW TXDOLW\ DV UHÀHFWHG LQ IXUWKHU VPDOOHU JDLQV DWWULEXWDEOH WR H[FKDQJH UDWH FKDQJHV UHGXFWLRQ LQ UHSRUWHG QRQSHUIRUPLQJ ORDQV E\ $VDFRQVHTXHQFHSUHWD[SUR¿WPDUJLQDQGUHWXUQRQ ELOOLRQRUSHUFHQWWRWRWDOELOOLRQDWWKHHQGRI DYHUDJH DVVHWV IHOO WR SHU FHQW DQG SHU FHQW :LWKQRQSHUIRUPLQJORDQVUHSUHVHQWLQJSHU UHVSHFWLYHO\DVFRPSDUHGWRSHUFHQWDQGSHU FHQWRIWRWDOORDQVDWHQGIURPSHUFHQWDW\HDU FHQWIRUWKH\HDU
Chart 10 – Trends in Non-Performing Loans
Supervision of Deposit-Taking Financial Institutions 46 Annual Report 2004
*URVVUHYHQXHIRUWKHV\VWHPWRWDOHGELOOLRQRI SHUFHQWDWHQG'HFHPEHURUDERYHWKH ZKLFKSHUFHQWZDVJHQHUDWHGIURPLQWHUHVWLQFRPH SUXGHQWLDOEHQFKPDUNRISHUFHQW$WHQG'HFHPEHU 2IWKLVELOOLRQZDVJHQHUDWHGIURPORDQV RQO\RQHOLFHQVHHDVDUHVXOWRIIDLUO\UDSLGDVVHW billion from investments while non-interest income JURZWKIHOOPDUJLQDOO\EHORZWKHSUXGHQWLDOPLQLPXP RIELOOLRQDFFRXQWHGIRUWKHUHPDLQLQJSHU and took remedial action at the request of the regulatory FHQW 6HUYLFH FKDUJHV DQG FRPPLVVLRQV WRWDOLQJ DXWKRULWLHV billion were the major source of non-interest income Licensees operated within the statutory deposit and HDUQHG2QWKHRWKHUKDQGLQWHUHVWFRVWVRQGHSRVLWV ERUURZLQJV WR FDSLWDO EDVH OHYHUDJH OLPLWV RI DQGERUURZLQJVWRWDOOHGELOOLRQDQGZDVWKHPDMRU DQG IRU FRPPHUFLDO EDQNV DQG ),$ OLFHQVHHV H[SHQVHLWHPUHSUHVHQWLQJSHUFHQWRIELOOLRQ UHVSHFWLYHO\ 7KH RYHUDOO V\VWHP UHFRUGHG D UDWLR RI LQ WRWDO RSHUDWLQJ H[SHQVHV 6WDII H[SHQVHV RI DWHQG'HFHPEHU ELOOLRQDFFRXQWLQJIRUSHUFHQWRIWRWDOH[SHQVHV ZDVWKHVHFRQGODUJHVWFKDUJHDJDLQVWHDUQLQJV 4.6. Credit Unions
2I WKH ELOOLRQ LQ SUR¿WV JHQHUDWHG DFURVV WKH 'XULQJ WKH %DQN FRQWLQXHG HIIRUWV DLPHG DW V\VWHP WKH FRPPHUFLDO EDQNLQJ JURXS DFFRXQWHG IRU DFKLHYLQJ ¿QDOL]DWLRQ RI WKH GUDIW %DQN RI -DPDLFD ELOOLRQ RU SHU FHQW WKH EXLOGLQJ VRFLHWLHV &UHGLW8QLRQV 5HJXODWLRQVWKDWZLOOHVWDEOLVKDQHZ ELOOLRQ RU SHU FHQW DQG ),$ OLFHQVHHV VXSHUYLVRU\ UHJLPH IRU FUHGLW XQLRQV ,Q WKLV UHJDUG ELOOLRQRU SHUFHQW WKH %2- DW WKH UHTXHVW RI WKH 0LQLVWHU RI )LQDQFH DQG 3ODQQLQJ FRQYHQHG VHYHUDO PHHWLQJV GXULQJ WKH 4.5.6. Capital Adequacy \HDUZLWKWKHUHSUHVHQWDWLYHRUJDQL]DWLRQWKH-DPDLFD 3UR¿WV DORQJ ZLWK IDLU YDOXH DQG RWKHU HTXLW\ EDVHG Cooperative Credit Union League (hereafter the reserves accounted for growth in shareholders’ equity /HDJXH 7KHVH PHHWLQJV ZHUH KHOG WR DGGUHVV QHZ RISHUFHQWGXULQJWKH\HDUWRELOOLRQ2I concerns raised by the League subsequent to its earlier WKLVYDOXHFDSLWDOEDVHHOHPHQWV LHUHJXODWRU\FDSLWDO GLVFXVVLRQVZLWKWKH%DQN7KHGHOLEHUDWLRQVWRDODUJH which represent permanent realized capital sources grew extent centered on the League’s appropriate role as E\ELOOLRQRUSHUFHQWWR ELOOLRQDW\HDU well as issues relative to proposed minimum capital HQG7KHLQFUHDVHLQFDSLWDOEDVHUHÀHFWHGPDQGDWRU\ requirements and unsecured credit limits under the DQGGLVFUHWLRQDU\WUDQVIHUVRIELOOLRQIURPUHDOL]HG IRUWKFRPLQJUHJXODWLRQV3HQGLQJWKH0LQLVWHU¶V¿QDO SUR¿WV WR VWDWXWRU\ FDSLWDO UHVHUYH IXQGV DV SURYLGHG determination on the applicable supervisory structures IRUXQGHU¿QDQFLDOOHJLVODWLRQDVZHOODVDELOOLRQ DQG RWKHU SROLF\ PDWWHUV LW LV DQWLFLSDWHG WKDW WKH reduction in capital impairments which were in evidence UHJXODWLRQVVKRXOGVKRUWO\EH¿QDOL]HGDQGVXEPLWWHGWR LQWZROLFHQVHHVDWWKHHQGRI'HFHPEHU 3DUOLDPHQWIRUDSSURYDOGXULQJ
*LYHQDIDVWHUUDWHRILQFUHDVHLQFDSLWDOUHODWLYHWRDVVHW 4.6.1. Supervisory Developments the ratio of primary capital to total assets increased 7KH %2- KDV FRQWLQXHG LWV SUHSDUDWRU\ ZRUN LQ PDUJLQDOO\WRSHUFHQWDWHQG'HFHPEHUIURP anticipation of the adoption of full supervisory
Supervision of Deposit-Taking Financial Institutions Bank of Jamaica responsibility for credit unions and the licensing 'XULQJWKH\HDUWKHUHZDVDPHUJHURIWZRVPDOOFUHGLW SURFHVVWKDWZLOOEHLPSOHPHQWHGDQGÀRZIURPWKHQHZ unions (Mount Friendship Cooperative Credit Union 5HJXODWLRQV /LPLWHGDQG&DVVDYD5LYHU&RRSHUDWLYH&UHGLW8QLRQ /LPLWHG ZLWKRQHRIWKHODUJHUHQWLWLHV &KXUFKHV&R 'XULQJ WKH \HDU WKH %DQN LQ FROODERUDWLRQ ZLWK WKH RSHUDWLYH&UHGLW8QLRQ/LPLWHG ZKLOHDQRWKHUFUHGLW &DULEEHDQ 5HJLRQDO 7HFKQLFDO $VVLVWDQFH &HQWUH union (Government Workers Cooperative Credit Union &$57$& FRQYHQHG WZR VHPLQDUV RQ FRUSRUDWH /LPLWHG RSWHGIRUYROXQWDU\OLTXLGDWLRQ$WWKHHQGRI JRYHUQDQFH ZKLFK DOVR LQFOXGHG VHJPHQWV RQ $QWL WKHQXPEHURIFUHGLWXQLRQVLQRSHUDWLRQWRWDOOHG 0RQH\ /DXQGHULQJ UHTXLUHPHQWV IRU FUHGLW XQLRQV DVDJDLQVWDWWKHHQGRI which saw a high level of participation by industry UHSUHVHQWDWLYHV 4.6.2. Credit Union Performance Highlights
The programme of prudential reporting introduced 'HVSLWHWKHFRQWUDFWLRQLQWKHQXPEHURIHQWLWLHVDVDW in 2003 continued with credit unions submitting the 'HFHPEHUWRWDODVVHWVRIWKHFUHGLWXQLRQVHFWRU preliminary monthly balance sheet and quarterly LQFUHDVHGE\ SHUFHQWWRELOOLRQIURP earnings and expenditure returns directly to the Bank to ELOOLRQUHFRUGHGLQWKHSUHYLRXV\HDU*URZWKLQWKLV IDFLOLWDWHRIIVLWHDVVHVVPHQW7UDLQLQJVHPLQDUVKDYH sub-sector was further underscored by an increase in EHHQFRQGXFWHGRQWKH¿OLQJRIUHWXUQVZLWKWKH&HQWUDO PHPEHUVKLSWRIURPDVDW'HFHPEHU %DQN DQG LQ LQVWDQFHV ZKHUH VSHFL¿F QHHGV ZHUH 2003 (see Table 31 LGHQWL¿HGIXUWKHUWUDLQLQJVHVVLRQVZHUHFRQYHQHGIRU 'XULQJ WRWDO ORDQV LQFUHDVHG E\ SHU FHQW UHOHYDQWFUHGLWXQLRQUHSUHVHQWDWLYHV7KHIXOOVXLWHRI prudential returns for credit unions will be introduced WRELOOLRQUHODWLYHWRELOOLRQDWHQG Loans continued to represent the major component of RQDSKDVHGEDVLVWREULQJWKLVVHFWRURQSDUZLWKWKH rest of the deposit-taking system in terms of regulatory RYHUDOODVVHWVZLWKLWVUHODWLYHVKDUHLQFUHDVLQJWR SHUFHQWXSIURPSHUFHQWDVDWHQG7KLV UHSRUWLQJ increase in loans was funded primarily by an expansion 2QVLWHH[DPLQDWLRQVRIFUHGLWXQLRQVZKLFKFRPPHQFHG LQVDYLQJVRISHUFHQWWRELOOLRQ7KHORDQV LQPLGFRQWLQXHGGXULQJ%\\HDUHQGWKH WRVDYLQJUDWLRLQFUHDVHGWRSHUFHQWIURP SHU %DQNKDGH[DPLQHGSHUFHQWRIWKHVHFWRULQWHUPVRI FHQWDWHQG PDUNHWVL]HLQDVVHWV Table 31 Selected Credit Union Data 2000-2004
Year No. of Membership Total Total Loans Loans: Total Assets End Credit Savings Savings DJH J$m Unions J$m J$m 60 2004 *Source of data: Jamaica Co-operative Credit Union League (JCCUL). Figures do not include data for one credit union that is not a member of JCCUL with assets of $28 MN at end 2004.
Supervision of Deposit-Taking Financial Institutions 48 Annual Report 2004
4.7. Current Issues In Bank Supervision 7KH1HZ$FFRUGLVEDVHGRQWKUHHSLOODUV 4.7.1. Basle Core Principles x 3LOODU 0LQLPXP&DSLWDO5HTXLUHPHQWV ZKLFK UHTXLUHH[SOLFLWFDSLWDOFKDUJHVIRUFUHGLWULVN ,QWKH%DQN¶VVXSHUYLVRU\SROLF\DQGGHYHORSPHQW PDUNHWULVNVDQGRSHUDWLRQDOULVNH[SRVXUHV functions continued to focus on achieving the x 3LOODU,, 6XSHUYLVRU\5HYLHZ DQG x 3LOODU,,, 0DUNHW'LVFLSOLQH IROORZLQJ 'XULQJ WKH \HDU WKH %DQN SDUWLFLSDWHG LQ VHYHUDO )XOOFRPSOLDQFHZLWKWKH%DVHO&RUH3ULQFLSOHV UHJLRQDOGLVFXVVLRQVUHJDUGLQJWKHLPSOLFDWLRQVRIWKH IRU(IIHFWLYH%DQNLQJ6XSHUYLVLRQWKHJOREDO LPSOHPHQWDWLRQRI%DVHO,,RQ¿QDQFLDOLQVWLWXWLRQVLQ standard on which the effectiveness of bank WKH/DWLQ$PHULFDQDQG&DULEEHDQUHJLRQVDQGLVDOVR VXSHUYLVRU\ V\VWHPV DUH DVVHVVHG DV ZHOO DV spearheading a Caribbean Technical Working Group other international standards governing banking RQ%DVHO,,LPSOHPHQWDWLRQ VHH6HFWLRQ 6XSHUYLVRU\ and related issues; and &RRSHUDWLRQDQG,QWHUDFWLRQ 7KH%DQNDOVRDQDO\VHG WKH LPSOLFDWLRQV IRU ORFDO ¿QDQFLDO LQVWLWXWLRQV DQG (QVXULQJWKDW-DPDLFD¶VOHJLVODWLYHDQGUHJXODWRU\ commenced the development of a plan for eventual IUDPHZRUN DV ZHOO DV %DQN RI -DPDLFD¶V LPSOHPHQWDWLRQLQ-DPDLFD7KHSODQZLOOHVWDEOLVKWKH VXSHUYLVRU\ DSSURDFKHV PHWKRGRORJLHV DQG areas of national discretion and the methodologies for tools remain dynamic and relevant to the local WKHFDOFXODWLRQRIULVNH[SRVXUHV7KLVGRFXPHQWZLOO banking environment. EH¿QDOL]HGGXULQJDWZKLFKSRLQWWKH%DQNZLOO LQYLWHIXUWKHUGLVFXVVLRQVZLWKWKHLQGXVWU\7KH&HQWUDO ,QWKLVUHJDUGWKH%DQNUHDVVHVVHGLWVFRPSOLDQFHZLWK %DQNLVWDUJHWLQJ IRUIXOODGRSWLRQRI%DVHO the Basel Core Principles and completed an action plan ,,ZLWKLPPHGLDWHIRFXVEHLQJJLYHQWRLPSOHPHQWLQJ that will ensure that the necessary recommendations SLOODU,,DQG3LOODU,,,LQWKHPHGLXPWHUPLQDGYDQFHRI for legislative amendments and enhancements to the DODWHUDGRSWLRQRI3LOODU, UHJXODWRU\VXSHUYLVRU\ IUDPHZRUN DUH HIIHFWHG RQ D WLPHO\EDVLV 4.7.3. Capital Adequacy Framework
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Supervision of Deposit-Taking Financial Institutions Bank of Jamaica
The Bank has assessed the prudential risk-based capital DQG FURVVERUGHU FRQVROLGDWHG VXSHUYLVLRQ WKH %DQN DGHTXDF\UDWLRVLQFHWKHODWH VDQGLQGLFDWRUVVKRZ has determined that the governing laws will require that all institutions are currently compliant with the IXUWKHUDPHQGPHQWWRUHÀHFWWKHEURDGSULQFLSOHVDQG PLQLPXP$QHZTXDUWHUO\&DSLWDO$GHTXDF\SUXGHQWLDO objectives of consolidated supervision (including full return to the Bank of Jamaica was introduced in access to and control over the holding companies of 'HFHPEHUWRIDFLOLWDWHDPRUHUH¿QHGFRPSXWDWLRQ EDQNV DQGDOORZIRUVXSHUYLVRU\ÀH[LELOLW\WRUHVSRQG DQGUHSRUWLQJRIWKHULVNEDVHGFDSLWDOUDWLR WRFKDQJLQJFLUFXPVWDQFHV7KLVOHJDOIUDPHZRUNZLOO also need to be supported by enforceable technical 4.7.4. Consolidated Supervision JXLGHOLQHV VWDQGDUGV DQG GLUHFWLRQV WKDW PD\ EH LVVXHGDQGDOWHUHGE\WKH6XSHUYLVRUXQGHUWKHDXWKRULW\ ,QUHFHQW\HDUVWKHUHKDVEHHQDJURZLQJWUHQGWRZDUGV SUHVHQWO\SURYLGHGE\WKH%2-$FW,QWKLVUHJDUGWKH WKHHVWDEOLVKPHQWRI¿QDQFLDODQGPL[HGFRQJORPHUDWH %2- KDV EHHQ UHYLHZLQJ WKH FXUUHQW OHJDO IUDPHZRUN VWUXFWXUHV DFURVV WKH UHJLRQ SDUWLFXODUO\ WKURXJK for consolidated supervision with a view to presenting PHUJHUV DQG DFTXLVLWLRQV $ QXPEHU RI VXSHUYLVRU\ UHFRPPHQGDWLRQV IRU WKH SURPXOJDWLRQ RI VSHFL¿F issues have arisen as a result of banks operating within +ROGLQJ&RPSDQ\OHJLVODWLRQDVWKH¿UVWVWHSWRZDUGV ODUJH FRPSOH[ VWUXFWXUHV SULPDU\ RI ZKLFK DUH WKH HIIHFWLYHLPSOHPHQWDWLRQ resultant vulnerabilities to contagion risks arising from the operations of other group companies and the creation *LYHQ WKH VLJQL¿FDQW LQFUHDVH LQ FURVVERUGHU of complex structures that may obfuscate supervisory H[SDQVLRQLQWRUHJLRQDOPDUNHWVDQGWKHLPPLQHQFHRI VFUXWLQ\ WKH &DULEEHDQ 6LQJOH 0DUNHW DQG (FRQRP\ &60( ,Q UHFRJQLWLRQ RI WKHVH GHYHORSPHQWV DQG UHODWHG WKH &DULEEHDQ *URXS RI %DQN 6XSHUYLVRUV &*%6 VXSHUYLVRU\ LPSOLFDWLRQV EDQNLQJ VWDWXWHV ZHUH has undertaken a regional approach to consolidated amended in 2002 to enable the Bank of Jamaica to more supervision to ensure that there is harmonization of legal HIIHFWLYHO\XQGHUWDNHFRQVROLGDWHGVXSHUYLVLRQ7KHVH frameworks and supervisory methodologies (see section DPHQGPHQWV ZHUH GHVLJQHG WR DOORZ WKH 6XSHUYLVRU\ 5HJLRQDO ,QWHUDFWLRQ 7R WKLV HQG D 7HFKQLFDO $XWKRULW\ WR TXDQWLWDWLYHO\ DV ZHOO DV TXDOLWDWLYHO\ Work Group was formed during 2003 to examine the DVVHVVWKH¿QDQFLDOFRQGLWLRQRIEXVLQHVVJURXSVZKLFK issues and to make the necessary recommendations as LQFOXGHVOLFHQVHGGHSRVLWWDNLQJLQVWLWXWLRQV7KLVLVWR WRWKHZD\IRUZDUG7KH¿UVWUHSRUWRIWKH:RUN*URXS identify and evaluate all the risks to which those entities ZDV SUHVHQWHG DW WKH ;;,,$QQXDO &RQIHUHQFH RI WKH may be exposed and to require corrective actions when &DULEEHDQ*URXSRI%DQNLQJ6XSHUYLVRUVLQ0D\ DQGZKHUHQHFHVVDU\ ZKHUHLQDFULWLFDOQHHGZDVLGHQWL¿HGE\WKH*URXSIRU harmonized legislative requirements across the region 'XULQJ WKH %2- FRQWLQXHG ZRUN WRZDUGV WKH to facilitate consistency in supervisory approaches and full implementation of the provisions of the 2002 HOLPLQDWHRSSRUWXQLWLHVIRUUHJXODWRU\DUELWUDJH%DVLF amendments with the aim of having consolidated principles to be incorporated in such legislation were VXSHUYLVLRQ IXOO\ HIIHFWHG LQ 7R WKLV HQG DOVRLGHQWL¿HGLQFOXGLQJWKHQHHGIRUVSHFL¿FKROGLQJ in examining the supervisory issues of both domestic FRPSDQ\ODZV
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4.7.5. Corporate Governance for carrying out the corporate governance function in OLFHQVHHV LHVKDUHKROGHUVGLUHFWRUVDQGVHQLRURI¿FHUV There has been increasing local and international LQDFFRUGDQFHZLWKVWDWHGFULWHULD,QWKLVUHJDUGWKH attention to the issue of corporate governance with Bank makes recommendations to the Minister of Finance LQWHUQDWLRQDO DJHQFLHV VXFK DV WKH 2UJDQLVDWLRQ IRU who has the ultimate responsibility for determining the (FRQRPLF&RRSHUDWLRQDQG'HYHORSPHQW 2(&' DQG ³¿WDQGSURSHU´VWDWXVRIVXFKLQGLYLGXDOVWRXQGHUWDNH WKH%DVHO&RPPLWWHHRI%DQNLQJ6XSHUYLVRUVLVVXLQJ WKH¿GXFLDU\UHVSRQVLELOLWLHVLQKHUHQWLQGHSRVLWWDNLQJ standards and guidelines to enhance the framework for DFWLYLWLHV ,Q RUGHU WR SURYLGH JUHDWHU FODULW\ WR WKH FRUSRUDWH JRYHUQDQFH LQ RUJDQL]DWLRQV $W WKH %DQN DSSURDFKRIWKH&HQWUDO%DQNLQIXO¿OOLQJWKLVVWDWXWRU\ full recognition is given to the fact that supervisory REOLJDWLRQWKH%2-LVVXHGµ*XLGHOLQHVIRU)LWDQG3URSHU objectives can only be achieved if accompanied by a $VVHVVPHQWV¶LQ'HFHPEHU7KHSXUSRVHRIWKH sound corporate governance framework in deposit- Guidelines is not only to disclose the criteria applied by WDNLQJ HQWLWLHV SURPRWHG DQG DGKHUHG WR QRW RQO\ E\ WKH%2-LQLWVRZQUHYLHZEXWDOVRWRVHWWKHVWDQGDUGIRU WKHERDUGDQGPDQDJHPHQWEXWVKDUHKROGHUVDQGRWKHU entities’ own assessment of individuals in determining VWDNHKROGHUVDVZHOO6LQFHWKHPLG VWKH%DQN WKHLU VXLWDELOLW\ WR XQGHUWDNH ERDUG PDQDJHPHQW DQG KDVLVVXHG6WDQGDUGVRI%HVW3UDFWLFHZKLFKGHWDLOLWV VHQLRUVWDIIUHVSRQVLELOLWLHVLQ¿QDQFLDOLQWHUPHGLDULHV expectations of the Board and Management in various DVSHFWV RI OLFHQVHHV¶ RSHUDWLRQV HJ FUHGLW IRUHLJQ 4.8. Anti-Money Laundering/Combating the H[FKDQJHFDSLWDOPDQDJHPHQWDQGRWKHUDUHDV Financing of Terrorism (Aml/Cft)
7KH%2-FRQWLQXHGWRSOD\DYLWDOUROHLQWKHGHYHORSPHQW 'XULQJWKH%2-XQGHUWRRNWKHIXUWKHUGHYHORSPHQW DQG H[HFXWLRQ RI D QDWLRQDO$0/&)7 IUDPHZRUN WR RI D VSHFL¿F 6WDQGDUG RI %HVW 3UDFWLFH RQ &RUSRUDWH SURPRWHWKHVDIHW\VRXQGQHVVDQGLQWHJULW\RI-DPDLFD¶V *RYHUQDQFH ZKLFK ZLOO EH LVVXHG WR WKH LQGXVWU\ IRU ¿QDQFLDOV\VWHP7KLVKDVLQYROYHGWKHSURPRWLRQRI FRPPHQWLQHDUO\7KHGUDIW6WDQGDUGSULPDULO\ compliance with international obligations under the emphasizes the necessity of the four important YDULRXV8QLWHG1DWLRQV6HFXULW\&RXQFLO5HVROXWLRQVDQG RYHUVLJKW IXQFWLRQV ZLWKLQ D ¿QDQFLDO LQVWLWXWLRQ DV RWKHULQWHUQDWLRQDOVWDQGDUGVSDUWLFXODUO\WKHDFFHSWHG RXWOLQHGEHORZDQGWKHPLQLPXPH[SHFWDWLRQVRIWKH EHQFKPDUN WKH )RUW\ 3OXV (LJKW 5HFRPPHQGDWLRQV 6XSHUYLVRU\$XWKRULW\ZLWKUHJDUGWRWKHH[HFXWLRQRI LVVXHG E\ WKH )LQDQFLDO $FWLRQ 7DVN )RUFH )$7) WKHVHIXQFWLRQV on anti-money laundering and the combating of the x Board and senior management oversight; ¿QDQFLQJ RI WHUURULVP $V RI -DQXDU\ WKHVH x ,QGHSHQGHQWRYHUVLJKW 5HFRPPHQGDWLRQV KDYH IRUPDOO\ EHHQ UHYLVHG WR WKH x 'LUHFWOLQHVXSHUYLVLRQRIEXVLQHVVDUHDV DQG )$7))RUW\1LQH5HFRPPHQGDWLRQV x ,QGHSHQGHQWULVNPDQDJHPHQWDQGDXGLW
This was carried out primarily through the Bank’s 2IHTXLYDOHQWLPSRUWDQFHWKHUHOHYDQW¿QDQFLDOVWDWXWHV active involvement in the Financial Crimes Legislative give the Bank of Jamaica responsibility for assessing 7DVN )RUFH D QDWLRQDO FRPPLWWHH HVWDEOLVKHG E\ WKH WKH ¿WQHVV DQG SURSULHW\ RI LQGLYLGXDOV UHVSRQVLEOH +RQ0LQLVWHURI)LQDQFHDQG3ODQQLQJZLWKDPDQGDWH
Supervision of Deposit-Taking Financial Institutions Bank of Jamaica to review the existing legislative framework and make comprehensively reviewed to enhance the scope of the UHFRPPHQGDWLRQV WR VWUHQJWKHQ WKH FRXQWU\¶V $0/ RQVLWHDVVHVVPHQWRIWKH$0/&)7IUDPHZRUNVZLWKLQ DQG &)7 )UDPHZRUNV 7KH 7DVN )RUFH FKDLUHG E\ %2-¶VVXSHUYLVHGHQWLWLHV6HPLQDUVZHUHDOVRKHOGIRU WKH'HSXW\6XSHUYLVRURI%DQNVSURGXFHGWZRUHSRUWV PDQDJHUV DQG FRPSOLDQFH RI¿FHUV RI GHSRVLWWDNLQJ which made recommendations for key reforms to LQVWLWXWLRQVWRUHYLHZDQGGLVFXVVWKHXSJUDGHG$0/ increase the effectiveness of Jamaica’s anti-money CFT requirements and fully apprise them of the Bank’s ODXQGHULQJIUDPHZRUN7KLVKDVUHVXOWHGLQDPHQGPHQWV expectations with regard to an operationally effective WR ¿QDQFLDO OHJLVODWLRQ EHLQJ SDVVHG E\ 3DUOLDPHQW LQ $0/&)7IUDPHZRUN 2004 (see Section 4.9: Legislative Amendments 4.9. Legislative Amendments The Task Force also proposed several critical DPHQGPHQWV WR WKH H[LVWLQJ 0RQH\ /DXQGHULQJ $FW $FRPSUHKHQVLYHUHYLVLRQRIWKHOHJLVODWLYHIUDPHZRUN DQG WKH SURPXOJDWLRQ RI D QHZ VWDWXWH WKH )LQDQFLDO is a necessary and fundamental step in achieving the ,QYHVWLJDWLRQV 'LYLVLRQ ),' $FW WR JLYH QHFHVVDU\ supervisory policy and developmental objectives noted OHJDOLGHQWLW\WRWKH)LQDQFLDO,QYHVWLJDWLRQV'LYLVLRQRI HOVHZKHUHLQWKLVVHFWLRQ+HQFHLQNHHSLQJERWKZLWK WKH0LQLVWU\RI)LQDQFH%RWKWKH0RQH\/DXQGHULQJ LWV UROH DV &KDLU RI WKH 1DWLRQDO )LQDQFLDO &ULPHV $PHQGPHQW%LOODQGWKH),'%LOOZHUHDWWKHHQGRI EHIRUHD-RLQW6HOHFW&RPPLWWHHRI3DUOLDPHQW /HJLVODWLYH7DVN)RUFHDVZHOODV5HJXODWRU\$XWKRULW\ The Bank also participated in the development of IRU WKH GHSRVLW WDNLQJ VHFWRU WKH %DQN RI -DPDLFD the Terrorism Prevention Bill which is currently GXULQJWKH\HDUVSHDUKHDGHGDQGRUXQGHUWRRNDQXPEHU EHIRUH 3DUOLDPHQW IRU ¿QDO SDVVDJH see Section 4.9: of initiatives for reform of legislation and related Legislative Amendments UHJXODWLRQV7KLVLQFOXGHGWKHVWDUWRIDPDMRUUHYLHZ of legislation with a view to making recommendations )XUWKHUWKH%2-DOVRLVVXHGGXULQJWKH\HDUWKHµ2004 WRHQVXUHWKDW Guidance Notes for the Prevention and Detection of x -DPDLFD¶V¿QDQFLDOODZVDUHLQIXOOFRPSOLDQFH Money Laundering and Terrorist Financing Activities’ with the Basel Core Principles for Effective WR DOO VSHFL¿HG ¿QDQFLDO LQVWLWXWLRQV GHSRVLWWDNLQJ %DQNLQJ6XSHUYLVLRQ OLFHQVHHV LQFOXGLQJ FUHGLW XQLRQV 7KHVH UHYLVHG x The amalgamation of the various pieces *XLGDQFH 1RWHV ZHUH XSJUDGHG WR LQFRUSRUDWH WKH of legislation governing banking and other )RUW\ 3OXV (LJKW 5HFRPPHQGDWLRQV RI WKH )$7) DV GHSRVLWWDNLQJ LQVWLWXWLRQV LQWR DQ 2PQLEXV ZHOODVWKH%HVW3UDFWLFH6WDQGDUGVIRU&XVWRPHU'XH VWDWXWH DIWHU HOLPLQDWLQJ WKH H[LVWLQJ JDSV 'LOLJHQFHLVVXHGE\WKH%DVHO&RPPLWWHHRQ%DQNLQJ GLIIHUHQFHVLQWKHYDULRXV$FWVWRFUHDWHDOHYHO 6XSHUYLVLRQ$GGLWLRQDOO\WKHVFRSHRIWKH*XLGDQFH SOD\LQJ¿HOGDFURVVDOOGHSRVLWWDNLQJHQWLWLHV 1RWHVZDVH[SDQGHGWRLQFRUSRUDWHVSHFLDOUHTXLUHPHQWV and IRU FDPELRV DQG UHPLWWDQFH DJHQWV ZKLFK IDOO ZLWKLQ x ([SOLFLW SURPXOJDWLRQ RI )LQDQFLDO +ROGLQJ WKHRYHUVLJKWRIWKH%DQN Company legislation under the proposed omnibus statute (see Section 4.7.5: 7KH %2-¶V H[DPLQDWLRQ PHWKRGRORJ\ ZDV DOVR Consolidated Supervision
Supervision of Deposit-Taking Financial Institutions Annual Report 2004
7KHVWDWXVRIVSHFL¿FZRUNDQGGHYHORSPHQWVRQERWK FRQ¿VFDWLRQ DQG IRUIHLWXUH RI SURFHHGV RI ¿QDQFLDO GLUHFWVXSHUYLVRU\DQG$0/&)7OHJLVODWLRQDUHQRWHG FULPHV EHORZ $PHQGPHQWVWRWKH Bank of Jamaica Act approved by $PHQGPHQWV WR WKH Money Laundering Act and WKH+RXVHRI5HSUHVHQWDWLYHVGXULQJWKHODVWTXDUWHURI Regulations GHVLJQHG WR IXUWKHU VWUHQJWKHQ WKH H[SDQGHGRQWKHUHJLPHIRUWKH%DQNRI-DPDLFD FRXQWU\¶V $0/&)7 IUDPHZRUN DQG JLYH OHJDO WRVKDUHLQIRUPDWLRQZLWKRYHUVHDVUHJXODWRUV7KHVH recognition to new international standards in this area amendments also legislate the necessary safeguards ZHUHEHIRUH3DUOLDPHQWDW\HDUHQG7KHDPHQGPHQWV JRYHUQLQJKRZVXFKLQIRUPDWLRQPD\EHXVHGWRDVVXUH VHHNWRH[SDQGWKHUDQJHRISUHGLFDWHRIIHQFHVORZHU WKHFRQWLQXLQJFRQ¿GHQWLDOLW\RIVKDUHGLQIRUPDWLRQ WKH WKUHVKROG UHSRUWLQJ UHTXLUHPHQWV WR 86 improve on existing investigatory powers of the 7KH+RXVHRI5HSUHVHQWDWLYHVDOVRDSSURYHGDPHQGPHQWV authorities and further create an avenue for the future to the Banking and Financial Institutions Acts during GHVLJQDWLRQDQG$0/&)7UHJXODWLRQRI³JDWHNHHSHU´ WKHODVWTXDUWHU7KHVHDPHQGPHQWVQRZJLYHWKH%DQN SURIHVVLRQV LHODZ\HUVDFFRXQWDQWV DQG³GHVLJQDWHG of Jamaica express and unequivocal authority to take QRQ¿QDQFLDOLQVWLWXWLRQV´ UHJXODWRU\ DFWLRQ DJDLQVW ¿QDQFLDO LQVWLWXWLRQV ZKHUH they are found to be in breach of the Money Laundering The Terrorism Prevention Bill was before Parliament statute and any other statute governing the operations IRUSDVVDJHDW\HDUHQGKDYLQJDOUHDG\EHHQUHYLHZHG of these institutions (which would include the Terrorism E\ D -RLQW 6HOHFW FRPPLWWHH. This Bill will serve to 3UHYHQWLRQ%LOOZKHQSDVVHG 8SWRWKDWSRLQWWKH%DQN FULPLQDOL]H WKH DFW RI DQG ¿QDQFLQJ RI WHUURULVP DQG has taken action in any and all circumstances where LPSRVHREOLJDWLRQVRQ¿QDQFLDOLQVWLWXWLRQVIRUFXVWRPHU EUHDFKHV RI WKH 0RQH\ /DXQGHULQJ$FW ZDV GHHPHG LGHQWL¿FDWLRQ UHFRUG NHHSLQJ LQWHUQDO FRQWUROV DQG to be “unsafe and unsound conduct” on the part of the reportage of suspicious transactions relating to possible OLFHQVHH7KHDPHQGPHQWVDOVRUDWLRQDOL]H and increase WHUURULVWDFWLYLWLHVRUWHUURULVWHQWLWLHVWRWKH'HVLJQDWHG SHQDOWLHVDFURVVWKHEDQNLQJLQGXVWU\ DXWKRULW\ The Bank Of Jamaica (Building Societies) The Financial Investigations Division Bill which (Amendment) Regulations ZHUH DI¿UPHG E\ ZDVDOVREHIRUH3DUOLDPHQWDW\HDUHQGGHDOVZLWKWKH resolution in Parliament shortly after year end and VWDWXWRU\HVWDEOLVKPHQWRIWKH)LQDQFLDO,QYHVWLJDWLRQV serve to rationalize the supervisory regime applicable 'LYLVLRQZKLFKDFWVLQWHUDOLDDV-DPDLFD¶V)LQDQFLDO to building societies with those applicable to banks ,QYHVWLJDWLRQV 8QLW ),8 7KH 'LYLVLRQ ZKLFK LV DQG),$OLFHQVHHVLQWHUPVRIRIIHQFHVSHQDOWLHVDQG FXUUHQWO\ D XQLW RI WKH 0LQLVWU\ RI )LQDQFH ZLOO EH VXSHUYLVRU\ VDQFWLRQV 7KHVH 5HJXODWLRQV ZLOO FRPH statutorily responsible for the investigation of serious LQWRHIIHFWZKHQWKH\KDYHEHHQJD]HWWHG ¿QDQFLDO FULPHV LQFOXGLQJ PRQH\ ODXQGHULQJ 7KH %LOO DOVR DGGUHVVHV LQIRUPDWLRQ VKDULQJ SRZHUV RI &UHGLW &ODVVL¿FDWLRQ DQG 3URYLVLRQLQJ 5HJXODWLRQV LQYHVWLJDWLRQDQGHVWDEOLVKHVDUHJLPHIRUDVVHWVHL]XUH are presently in process of redrafting and will provide
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VSHFL¿FOHJDOJXLGHOLQHVIRUFUHGLWFODVVL¿FDWLRQUHTXLUHG ZDVHVWDEOLVKHGLQ XQGHUWKHDHJLVRIWKH&HQWUDO levels of provisioning for bad and doubtful debts and Bank Governors of member countries of the Caribbean RWKHUUHODWHGPDWWHUV HJFUHGLWUHQHJRWLDWLRQV $PRQJ &RPPXQLW\ &$5,&20 ZLWK WKH VSHFL¿F PDQGDWH RWKHUWKLQJVWKHVHUHJXODWLRQVZLOOGHWDLOWKH%DQNRI to co-ordinate the enhancement of bank supervisory -DPDLFD¶VDSSURDFKWRFODVVLI\LQJFUHGLWVLQWRGH¿QHG SUDFWLFHVLQWKH(QJOLVKVSHDNLQJ&DULEEHDQFRQVLVWHQW ORDQ FDWHJRULHV DQG DOVR VWLSXODWH VSHFL¿F PLQLPXP ZLWKLQWHUQDWLRQDOO\DFFHSWHGVWDQGDUGV SURYLVLRQLQJOHYHOV7KH%DQNRI-DPDLFDKDVDOUHDG\ required that all licensees comply with the proposed $VLJQL¿FDQWGHYHORSPHQWDQGDFKLHYHPHQWE\WKH&*%6 UHJXODWLRQV during 2004 was the crafting and execution of a formal Information Sharing Agreement (MOU) to facilitate The 4XDOL¿FDWLRQV RI $XGLWRUV 5HJXODWLRQV ZKLFK the consolidated supervision of cross-border institutions DUH H[SHFWHG WR WDNH HIIHFW GXULQJ IROORZLQJ RQ RSHUDWLQJLQPHPEHUMXULVGLFWLRQV7KLVZDVRULJLQDOO\ extensive dialogue that has already taken place with the conceptualized to apply to jurisdictions impacted ,QVWLWXWHRI&KDUWHUHG$FFRXQWDQWVRI-DPDLFD ,&$- by the merger of the Caribbean operations of two DQGWKHLQGXVWU\ZLOOVSHFLI\WKHVWDQGDUGVIRUDXGLWRUV internationally active banks which span eight member LQXQGHUWDNLQJDQH[WHUQDODXGLWRIDVXSHUYLVHG¿QDQFLDO MXULVGLFWLRQV+RZHYHUJLYHQWKHJHQHULFDSSOLFDELOLW\ LQVWLWXWLRQ$PRQJRWKHUWKLQJVVXFKFULWHULDUHODWHWR RIWKH028DOPRVWDOORIWKH&*%6PHPEHUVKLSKDYH WKHLQGHSHQGHQFHH[SHULHQFHH[SHUWLVHDQGDFDGHPLF since become signatories to the agreement to facilitate TXDOL¿FDWLRQV RI WKH H[WHUQDO DXGLWRUV DQG ZLOO DOVR FRQVROLGDWHG VXSHUYLVLRQ LQ WKH UHJLRQ ZKHUHYHU LW LV UHTXLUH SULRU QRWL¿FDWLRQ WR WKH %DQN RI -DPDLFD RI QHFHVVDU\$FWLQJXQGHUWKHSURYLVLRQRIWKH028WKH SURSRVHGDSSRLQWPHQWV Bank of Jamaica participated in the examination of a KROGLQJFRPSDQ\ORFDWHGLQ%DUEDGRVGXULQJ 4.10. Supervisory Cooperation And Interaction 7KH%DQNFRQWLQXHGWRSURYLGH6HFUHWDULDWVHUYLFHVWR 4.10.1. Financial Regulatory Council WKH &*%6 $FWLYLWLHV XQGHUWDNHQ E\ WKH 6HFUHWDULDW LQFOXGH OLDLVLQJ ZLWK &*%6 PHPEHUV RQ UHVHDUFK 7KH)LQDQFLDO5HJXODWRU\&RXQFLO )5& PHWRQ¿YH PDWWHUV RUJDQL]LQJ WHFKQLFDO ZRUNJURXSV WR GLVFXVV occasions during 2004 to examine issues affecting the research and strategise on regional approaches to ¿QDQFLDO LQGXVWU\ DV ZHOO DV LVVXHV VSHFL¿F WR GXDOO\ supervisory developments; coordinating regional OLFHQFHGHQWLWLHV training programmes with international providers; maintaining interfaces with international and other 4.10.2. Regional Interaction – The regional supervisory bodies; and maintaining a Caribbean Group of Banking Supervisors comprehensive database and record of the group’s DFWLYLWLHV'XULQJWKH\HDUWKH6HFUHWDULDWODXQFKHGDQ 7KH&DULEEHDQ*URXSRI%DQNLQJ6XSHUYLVRUV &*%6 8 extranet site (developed with the assistance of the Bank’s 7 The FRC comprises The Governor, Bank of Jamaica; The CEO, Financial Services Commission; The Financial Secretary; The CEO, Jamaica Deposit Insurance Corporation and The Solicitor General. 8 CGBS Membership now comprises fourteen regional jurisdictions, nine of which are presently core members of CARICOM. The Bank of Jamaica assumed the Chair of the Group for a two-year term in January 2003.
Supervision of Deposit-Taking Financial Institutions Annual Report 2004
,QIRUPDWLRQ6\VWHPV'HSDUWPHQW WRKRXVHVXSHUYLVRU\ to ensure that the corollary legislation is adequately LQIRUPDWLRQ SHUWDLQLQJ WR PHPEHU MXULVGLFWLRQV HJ reconciled to international supervision standards and SUR¿OH RI PHPEHUV¶ VXSHUYLVRU\ IUDPHZRUNV SDSHUV UHTXLUHPHQWVDQGWRHQVXUHWKDWSURSHUPHDVXUHVDUHLQ IURP FRQIHUHQFHV &*%6 HYHQWV OLVWLQJV OHJLVODWLRQ SODFHWRPDQDJHWKHWUDQVLWLRQ HWF 7KHZHEVLWHDOVRDOORZVIRURQOLQHDSSOLFDWLRQ for bank supervisory programmes of study and facilitate 4.10.3. International Interaction GLVFXVVLRQIRUXPVRQEDQNVXSHUYLVRU\LVVXHV The Bank of Jamaica remains committed to applying the highest international standards in its supervisory 7KH%DQNDOVRFKDLUHGD7HFKQLFDO*URXSRIWKH&*%6 SURFHVVHV ,Q DGGLWLRQ WR SROLF\ HQKDQFHPHQW DQG with a mandate to LPSOHPHQWDWLRQ ZRUN EHLQJ XQGHUWDNHQ WKH %DQN x DVVHVV WKH LPSOLFDWLRQV RI %DVHO ,, participated in international conferences and accessed implementation for Caribbean jurisdictions specialist training opportunities for its supervisory and strategize on practical approaches for the staff from overseas regulatory authorities such as the region; and )HGHUDO5HVHUYHWKH2I¿FHRI6XSHUYLVLRQRI)LQDQFLDO x determine operational protocols for the conduct ,QVWLWXWLRQVWKH)LQDQFLDO6WDELOLW\,QVWLWXWHRIWKH%DQN RI HIIHFWLYH &RQVROLGDWHG 6XSHUYLVLRQ ZLWKLQ RI ,QWHUQDWLRQDO 6HWWOHPHQWV %,6 7KH %DQN ZDV WKH UHJLRQ 7KLV ZDV DJDLQVW WKH EDFNJURXQG DOVRUHSUHVHQWHGE\WZRVHQLRURI¿FLDOVDWWKHELHQQLDO RI FRPSOH[ ¿QDQFLDO DQG PL[HG JURXS International Conference of Banking Supervisors VWUXFWXUHVZLWKLQVHYHUDOMXULVGLFWLRQVDVZHOO ZKLFKLVRUJDQL]HGE\WKH%DVHO&RPPLWWHH)LQDQFLDO as increasing cross-border expansion of certain 6WDELOLW\ ,QVWLWXWH )6, %DQN IRU ,QWHUQDWLRQDO banking groups across the region (see section 6HWWOHPHQWV %,6 DQG KRVWHG E\ WKH %DQN RI 6SDLQ 4.7.5: Consolidated Supervision GXULQJ6HSWHPEHU
The Working Group is also far advanced in the 2WKHU FULWLFDO SDUWLFLSDWRU\ UROHV LQ LQWHUQDWLRQDO GHYHORSPHQW RI D µ4XDQWLWDWLYH ,PSDFW 6WXG\¶ 4,6 RUJDQL]DWLRQVLQFOXGHGWKH'HSXW\6XSHUYLVRURI%DQNV¶ which is to be deployed in each member jurisdiction 'HSXW\&KDLUPDQVKLS IRUDWZR\HDUWHUPFRPPHQFHG WRDVVHVVWKHSRWHQWLDOLPSDFWRI%DVHO,,RQVXSHUYLVHG LQ -XQH RI 7KH Association of Supervisors of LQVWLWXWLRQV 7KH *URXS DOVR H[DPLQHG WKH W\SHV RI Banks of the Americas $6%$ ZKRVH PHPEHUVKLS calculations necessary for determination of market VSDQV WKLUW\¿YH VXSHUYLVRU\ MXULVGLFWLRQV DFURVV risk capital charges JLYHQ WKDW WKLV DUHD RI WKH 1RUWK&HQWUDODQG6RXWK$PHULFDDQGWKH&DULEEHDQ RULJLQDO&DSLWDO$FFRUGKDVQRWEHHQFRPSUHKHQVLYHO\ implemented by any of the Caribbean or Central The Bank of Jamaica also continued to serve as principal $PHULFDQPHPEHUMXULVGLFWLRQV contact for Jamaica to the Caribbean Financial Action Task Force &)$7) DQG PDLQWDLQV LQWHUDFWLRQ ZLWK The mandate of the Group was also expanded during the WKH%DVHO&RPPLWWHHRQ%DQNLQJ6XSHUYLVLRQERWKLQ year to incorporate an assessment of the implications LWVRZQFDSDFLW\DQGWKDWRI&KDLUDQG6HFUHWDULDWRUWKH RIWKH&DULEEHDQ6LQJOH0DUNHWDQG(FRQRP\ &60( &*%6
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,Q DGGLWLRQ WR LWV RZQ$0/&)7 UHYLHZ H[HUFLVHV DW to a complete revamping of present approaches with a GRPHVWLF EDQNLQJ HQWLWLHV WKH %DQN DOVR SDUWLFLSDWHG PRYHWRZDUGVDPRUHULVNIRFXVHGSURFHVV LQ DQ$0/ H[DPLQDWLRQ FRQGXFWHG LQ -DPDLFD E\ DQ 4.11.3. Risk Management Framework in RYHUVHDVUHJXODWRULQLWVFDSDFLW\DVµKRPH¶VXSHUYLVRU\ Deposit-Taking Entities DXWKRULW\IRUWKDWORFDOEDQNLQJJURXS ,QH[WULFDEO\LQWHUWZLQHGZLWKLQDQHIIHFWLYHJRYHUQDQFH 4.11. Outlook IUDPHZRUN LQ ¿QDQFLDO HQWLWLHV VKRXOG EH D G\QDPLF HQWHUSULVHZLGH ULVN PDQDJHPHQW SURJUDP ZKLFK ,Q DGGLWLRQ WR WKH ZRUN LQ WUDLQ DV LQGLFDWHG XQGHU FRQVWDQWO\ DVVHVVHV PHDVXUHV PRQLWRUV DQG VHHNV µ&XUUHQW%DQN6XSHUYLVLRQ,VVXHV¶IRFXVZLOODOVREH WR PLWLJDWH RU FRQWURO WKH ULVNV WR ZKLFK ¿QDQFLDO JLYHQGXULQJWRDFULWLFDOUHORRNRIVXSHUYLVRU\ LQVWLWXWLRQV DUH H[SRVHG 6RPH RI WKH PDMRU ULVNV approaches in the face of increased complexities in faced by banking entities include market (interest rate banking operations and developments in international DQG IRUHLJQ H[FKDQJH ULVN FUHGLW RSHUDWLRQDO OHJDO VXSHUYLVRU\VWDQGDUGV:RUNZLOODOVREHRQJRLQJRQ DQGUHSXWDWLRQDO)XUWKHUWRWKHVXLWHRI6WDQGDUGVRI various aspects of legislation to further codify principles Best Practices already issued which provide guidance RIVRXQGVXSHUYLVRU\SUDFWLFH WREDQNVIRUWKHULVNPDQDJHPHQWRIVSHFL¿FDUHDVRI RSHUDWLRQV WKH %2- ZLOO FRQWLQXH GXULQJ WKH 4.11.1. Administrative Outlook GUDIWLQJDQGGLVVHPLQDWLRQRI6WDQGDUGVIRUDUHDVVXFK DV The Bank seeks to maintain a dynamic and proactive x (OHFWURQLF%DQNLQJ5LVNV SRVWXUHLQLWVVXSHUYLVRU\DSSURDFK5HFRJQLVLQJWKH x 0DUNHW 5LVN 0DQDJHPHQW ZKLFK ZLOO need for better and timelier information on licensees to incorporate and replace standards issued in LQIRUPDVVHVVPHQWVDQGVXSHUYLVRU\UHVSRQVHDUHYLHZ ZLWKUHVSHFWWRLQWHUHVWUDWHDQGIRUHLJQ RIWKH,QIRUPDWLRQ6\VWHPVXQGHUSLQQLQJWKHEXVLQHVV H[FKDQJH SURFHVVHVRIWKH'LYLVLRQFRQWLQXHV$OWKRXJKDIHZ x &UHGLW5LVN0DQDJHPHQW±RULJLQDOO\LVVXHGLQ DQFLOODU\,QIRUPDWLRQ7HFKQRORJ\ ,7 UHODWHGVROXWLRQV EXWLVEHLQJXSGDWHGJLYHQHQKDQFHGULVN ZHUHLQLWLDWHGGXULQJGHYHORSPHQWZRUNRQDFRUH PDQDJHPHQWDSSURDFKHVDQGWKHHYROXWLRQRI QHZ,7V\VWHPWRXQGHUSLQWKHPDMRUEXVLQHVVSURFHVVHV international best practices; RI),6'LVVFKHGXOHGWRFRPPHQFH x &RXQWU\DQG7UDQVIHU5LVN0DQDJHPHQW DQG x &RQJORPHUDWH5LVN0DQDJHPHQW 4.11.2. Developments in Supervisory Management and Approaches 7KH 6WDQGDUG IRU WKH 0DQDJHPHQW RI &RXQWU\ DQG 7UDQVIHU 5LVN ZDV ¿QDOL]HG VKRUWO\ DIWHU \HDUHQG $ FULWLFDO UHYLHZ RI WKH H[DPLQDWLRQ SURFHVV ZDV following comments from the industry and issued to FRPPHQFHGLQVWDUWLQJIURPWKHOLFHQVLQJVWDJHWR WKHLQGXVWU\IRUDGRSWLRQ7KHUHPDLQLQJ6WDQGDUGVDUH RQVLWHH[DPLQDWLRQUHSRUWLQJDQGRQJRLQJPRQLWRULQJ expected to be issued to the industry for comments by 7KLVZRUNLVH[SHFWHGWRFRQWLQXHLQDQGZLOOOHDG WKHVHFRQGTXDUWHURI
Supervision of Deposit-Taking Financial Institutions Annual Report 2004
4.11.4. Electronic Banking
,Q UHFHQW \HDUV WKH ORFDO ¿QDQFLDO PDUNHW KDV VHHQ VLJQL¿FDQW JURZWK LQ LQVWLWXWLRQV¶ GHYHORSPHQW RI HOHFWURQLF EDQNLQJ HEDQNLQJ FDSDELOLWLHV DQG WKH RIIHULQJ RI UHODWHG VHUYLFHV 6XFK GHYHORSPHQWV KDYH EHHQ LQÀXHQFHG E\ D FRPELQDWLRQ RI LQFUHDVLQJ FRPSHWLWLRQ ZLWKLQ WKH ¿QDQFLDO VHFWRU DQG WKH resultant thrust to broaden product base and service GHOLYHU\ FKDQQHOV WKH GHPDQG IRU PRUH HI¿FLHQW DQG convenient capabilities; and the widening cost and delivery differentials between electronic capabilities DQGWUDGLWLRQDOGHOLYHU\FKDQQHOV
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Supervision of Deposit-Taking Financial Institutions Bank of Jamaica
Table 32
Supervision of Deposit-Taking Financial Institutions Annual Report 2004
Supervision of Deposit-Taking Financial Institutions 5. The Stock Market
ithin a context of increased market (see Financial Market Operations and The macroeconomic stability and expectations Foreign Exchange Market $GGLWLRQDOO\ WKH KLJKHU WRIIDYRXUDEOHHDUQLQJVIURPFRPSDQLHV WKDQDQWLFLSDWHGLQÀDWLRQUDWHRISHUFHQWIRU the Jamaican stock market recorded one of its strongest PD\KDYHLQÀXHQFHGKLJKHULQÀDWLRQDU\H[SHFWDWLRQVE\ FDOHQGDU\HDUSHUIRUPDQFHVLQ7KLVZDVUHÀHFWHG LQYHVWRUVIRUWKHSHULRG7KLVZRXOGKDYHKDGD LQUREXVWJDLQVLQWKHLQGLFHVSDUWLFXODUO\LQWKH¿UVWDQG positive effect on the stock market as investors sought ODVWTXDUWHUVRIWKH\HDU7KH0DLQ-6(,QGH[FORVHGDW DQDSSURSULDWHKHGJHIRULQÀDWLRQ SRLQWVUHÀHFWLQJJURZWKRISHUFHQWIRU 2004 (see Chart 11 7KH-DPDLFD6HOHFW,QGH[DQGWKH 7KHSUR¿WH[SHFWDWLRQVIRUPDQ\RIWKHOLVWHGFRPSDQLHV $OO-DPDLFD&RPSRVLWH,QGH[HQGHGWKHSHULRGSHU helped to kindle the market as did the mergers and FHQWDQG SHUFHQWKLJKHUUHVSHFWLYHO\ acquisitions10WKDWWRRNSODFHGXULQJWKH\HDU0DQ\RIWKH FRPSDQLHVKDGEHQH¿WHGIURPWKHKLJKUHWXUQVRQORFDO 7KH VLJQL¿FDQW JURZWK LQ WKH PDUNHW ZDV UHÀHFWHG LQ ¿[HGLQFRPHLQVWUXPHQWVDVZHOODVIURPWKHLUKROGLQJV WKH LQFUHDVH LQ WKH WRWDO PDUNHW FDSLWDOL]DWLRQ RI RIIRUHLJQFXUUHQF\LQWKHHDUO\SDUWRI7KHVWURQJ SHUFHQWWRELOOLRQIRU7KHWRWDOYROXPHRI HDUQLQJV IURP ¿[HG LQFRPH LQVWUXPHQWV LQ KDG shares traded LQFUHDVHG E\ SHU FHQW WR ELOOLRQ also rendered many of the share prices on the market units (see Chart 12 ZKLOH WKH YDOXH RI WKHVH WUDGHV undervalued relative to the earnings of companies during LQFUHDVHGE\SHUFHQWWR ELOOLRQ7KHORZHU WKDWSHULRG$VVXFKWKHPDUNHW¶VSHUIRUPDQFHLQ UHWXUQV IURP ¿[HG LQFRPH DQG WKH IRUHLJQ H[FKDQJH also represented a process by which the prices began to markets relative to 2003 would have engendered UHÀHFWDSSURSULDWHVKDUHYDOXHVRIWKHVHFRPSDQLHV LQYHVWRUFRQ¿GHQFHLQWKHJURZWKSURVSHFWVRIWKHHTXLW\ Chart 11
9 The number of units traded excludes block transactions (i.e., large units of individual trades in a particular stock) and includes the additional shares issued to the market by some companies. 10 ,Q3DQ&DULEEHDQ)LQDQFLDO6HUYLFHVPHUJHGZLWK0DQXIDFWXUHUV¶,QYHVWPHQW/WG+DUGZDUHDQG/XPEHUPHUJHGZLWK5DSLG6KHI¿HOGDQG/LIHRI Jamaica acquired Pan Caribbean Financial Services and First Life’s insurance and pension business. 60 Annual Report 2004
Chart 12 Total Volume Traded 2002 -2004
The stock market started the year strongly with gains of WKLUGTXDUWHURXWWXUQZDVPXFKVWURQJHUDVWKH0DLQ-6( SHUFHQWDQG SHUFHQWIRUWKHPRQWKVRI-DQXDU\ ,QGH[JDLQHGSHUFHQW$WWKHHQGRIWKH'HFHPEHU DQG )HEUXDU\ UHVSHFWLYHO\7KH UHWXUQV WKHQ LQFUHDVHG TXDUWHUWKHUHWXUQVRQWKHORFDOHTXLW\PDUNHWLQFUHDVHG VKDUSO\WRSHUFHQWIRU0DUFKDQG by the end of the compensating for the negative and low returns of the ¿UVWTXDUWHUWKH0DLQ-6(,QGH[KDGJURZQE\DUREXVW SUHYLRXV WZR TXDUWHUV )RU WKLV ODVW TXDUWHU WKH LQGH[ SHUFHQW JDLQHG SHUFHQWZLWKWKUHHFRQVHFXWLYHPRQWKVRI
7KHH[WUDRUGLQDU\JDLQLQWKHLQGH[IRUWKH¿UVWTXDUWHU JURZWK was followed by a lull in activity over the second quarter (see Chart 13 $IWHU DWWDLQLQJ D KLJK RI 2Q DYHUDJH VKDUH SULFHV LQFUHDVHG E\ SHU FHQW SHUFHQWLQ$SULOWKHLQGH[UHFRUGHGLWVODUJHVWPRQWKO\ ZLWKVWRFNVUHFRUGLQJVKDUHSULFHDSSUHFLDWLRQRIRYHU GHFOLQHIRUWKH\HDURISHUFHQWLQ0D\7KLVGHFOLQH SHUFHQWLQ2YHUDOOVWRFNVSRVWHGJDLQV FRQWULEXWHGWRDVHFRQGTXDUWHUORVVRI SHUFHQW7KH IRUWKHSHULRGZKLOHRQO\GHFOLQHG,QVWLWXWLRQVZLWKLQ
Chart 13
The Stock Market 61 Bank of Jamaica
Table 33
7RS7HQ6KDUH3ULFH3HUIRUPHUVLQ
Price at Change Change end 2004 2003 2004 ($) (%) (%)
Financial Services Capital & Credit Merchant Bank 32.0 19.812 434.2
Pan Caribbean Financial Services 34.1 15.8 416.7
Dehring Bunting & Golding 21.5 -34.8 186.7
Manufacturing
Caribbean Cement Company 12.9 34.6 268.6
Distribution
Hardware & Lumber 29.9 214.2
Other services
Kingston Wharves 4.9 276.9
Pegasus Hotels 10.0 194.1
Insurance
First Life 45.5 229.5
Life of Jamaica 11.3 189.7
Conglomerates
Lascelles de Mercado 202.1 197.1
Financial Services headed the list of the top 10 share ZKLFK ZHUH SHU FHQW DQG SHU FHQW RI PDUNHW SULFHSHUIRUPHUVIRUWKH\HDU7KHPDUNHWOHDGHUVZLWKLQ FDSLWDOL]DWLRQUHVSHFWLYHO\ this sector were Capital and Credit Merchant Bank SHU FHQW 3DQ &DULEEHDQ )LQDQFLDO 6HUYLFHV The returns from the stock market in 2004 overshadowed SHU FHQW DQG 'HKULQJ %XQWLQJ *ROGLQJ the equivalent investment gains in the foreign SHUFHQW see Table 33 FXUUHQF\PDUNHWDVZHOODVWKHUHWXUQVRQ¿[HGLQFRPH investments13 (see Chart 13 7KHFKDQJHVLQWKHYDOXH Financial Services accounted for most of the market’s RI WKH ZHLJKWHG DYHUDJH VHOOLQJ UDWH RI WKH 86 GROODU FDSLWDOL]DWLRQIRU7KLVVHFWRUUHSUHVHQWHGSHU were noticeably lower relative to 2003 when the rates FHQWRIWKHWRWDOYDOXHRIVKDUHVLQLVVXHRQWKHPDUNHW ZHUHPDLQO\LQÀXHQFHGE\WKHVSHFXODWLYHLPSXOVHVRI ahead of Manufacturing11 and Conglomerates WKH ¿UVW IRXU PRQWKV RI WKDW \HDU ZKLOH WKH JURZLQJ
11:HVW,QGLHV3XOSDQG3DSHUZDVGHOLVWHGIURPWKH-DPDLFD6WRFN([FKDQJHIRUIDLOXUHWRVXEPLWWKHLU¿QDQFLDOVWDWHPHQWVLQDFFRUGDQFH with the rules of the Exchange. 12 Capital & Credit Merchant Bank was listed on the JSE in May of 2003. 137KHPRQWK*2-7UHDVXU\%LOO5DWHLVXVHGWRUHSUHVHQWWKHUHWXUQVIURP¿[HGLQFRPHLQYHVWPHQWVLQDQG The Stock Market 62 Annual Report 2004
FRQ¿GHQFH E\ LQYHVWRUV DERXW WKH SURVSHFWV IRU WKH UDQJHG IURP SHU FHQW WR SHU FHQW ZKHUHDV LQ HFRQRP\LQZHUHUHÀHFWHGLQORZHU*2-7UHDVXU\ WKHUDWHVUDQJHGIURPSHUFHQWWRSHUFHQW %LOO\LHOGV 2QDYHUDJHWKHUHWXUQVIURPWKHPRQWK7UHDVXU\%LOOV ZHUHSHUFHQWLQFRPSDUHGWRSHUFHQW ,QYHVWRUVZLWKKROGLQJVLQ8QLWHG6WDWHVFXUUHQF\EHJDQ LQ WKH\HDUZLWKD¿UVWTXDUWHUUHWXUQRISHUFHQW7KLV UHÀHFWHG WKH PRQWKO\ JDLQV RI SHU FHQW DQG The equity returns on the other major regional exchanges FHQWLQ-DQXDU\DQG)HEUXDU\UHVSHFWLYHO\DJDLQVWWKH ZHUH QRW DV KLJK DV LQ -DPDLFD 'XULQJ WKH \HDU WKH -DPDLFDQ'ROODU7KLVZDVIROORZHGE\DORZHUVHFRQG &RPSRVLWH ,QGH[ LQ 7ULQLGDG 7REDJR DSSUHFLDWHG TXDUWHUUHWXUQRISHUFHQWZKLFKSDUWLDOO\UHÀHFWHG E\ SHU FHQW FRPSDUHG WR SHU FHQW LQ WKH SHU FHQW ORVV DJDLQVW WKH -DPDLFD 'ROODU LQ ZKLOHLQ%DUEDGRVWKH/RFDO,QGH[JUHZE\SHU $SULO FHQWFRPSDUHGWR SHUFHQWLQ7KHPDUNHWV in Trinidad & Tobago and Barbados were supported by 2YHU WKH FRXUVH RI WKH WKLUG TXDUWHU WKH UHWXUQ IURP strong share price gains by the Jamaican cross-listed KROGLQJ WKH 86 GROODU LQFUHDVHG WR SHU FHQW7KLV companies14 LQFOXGHGJDLQVRISHUFHQWLQ-XQHDQGSHUFHQW LQ-XO\%\WKH¿QDOTXDUWHURIWKH\HDUWKHUHWXUQVIURP The market in Trinidad & Tobago started the year KROGLQJ86GROODUVEHFDPHOHVVDWWUDFWLYHWRLQYHVWRUV VWURQJO\ZLWKDJDLQRI SHUFHQWLQWKH¿UVWTXDUWHU DVWKH86GROODUORVWSHUFHQWLQ2FWREHUDQG ZKLFKLQFOXGHGDSHUFHQWJURZWKLQWKHLQGH[LQ SHUFHQWLQ'HFHPEHUYLVjYLVWKH-DPDLFD'ROODURQ )HEUXDU\ZKLOHLQ%DUEDGRVWKH/RFDO,QGH[EHJDQWKH LWVZD\WRDORVVRISHUFHQWIRUWKHTXDUWHU%\WKH \HDUZLWKDTXDUWHUO\JDLQRISHUFHQW see Chart HQGRIWKH\HDUWKHUHWXUQIURPKROGLQJ86FXUUHQF\ 14) 'XULQJ WKH VHFRQG TXDUWHU WKH UDWH RI JURZWK LQ ZDVSHUFHQWFRPSDUHGWR SHUFHQWLQ the indices in Trinidad & Tobago and Barbados had VORZHGEXWE\OHVVWKDQWKHGHFOLQHLQWKHJURZWKUDWH The yields on the 6-month Treasury Bills were markedly H[SHULHQFHGLQWKH-6(LQWKDWTXDUWHU7KH&RPSRVLWH lower in 2004 in comparison to the yields that obtained ,QGH[ LQ 7ULQLGDG 7REDJR JUHZ DW D VORZHU EXW LQ 7KH \LHOGV PHDVXUHG RQ D PRQWKO\ EDVLV UHDVRQDEOHUDWHRISHUFHQWZKLOHLQ%DUEDGRVWKH /RFDO,QGH[LQFUHDVHGE\SHUFHQWIRUWKHTXDUWHU Chart 14 Quarterly Equity Returns in Jamaica, Trinidad and Barbados -2004
14 Capital & Credit Merchant Bank, Jamaica Money Market Brokers, Dehring, Bunting & Golding and Grace, Kennedy & Company are the only Jamaican stocks cross-listed in Trinidad & Tobago. Grace, Kennedy & Company was the only Jamaican stock listed on the Barbados Stock Exchange.
The Stock Market 63 Bank of Jamaica
The third quarter returns on the equity markets in Trinidad & Tobago and Barbados were comparable to WKDWRI-DPDLFD7KHPDLQLQGLFHVLQ7ULQLGDG 7REDJR DQG%DUEDGRVJUHZE\SHUFHQWDQGSHUFHQW UHVSHFWLYHO\7KHVHPDUNHWVHQGHGWKH\HDURQDVWURQJ QRWH DV WKH LQGLFHV SRVWHG JDLQV RI SHU FHQW DQG SHUFHQWIRUWKH'HFHPEHUTXDUWHUUHVSHFWLYHO\
Capital and Credit Merchant Bank was the top performing stock in Trinidad & Tobago’s market with D FDSLWDO JDLQ RI SHU FHQW *UDFH .HQQHG\ Company’s share price did well with an appreciation of SHUFHQWDQGZDVDOVRWKHIRXUWKEHVWSHUIRUPLQJ VWRFNLQ%DUEDGRVZLWKDFDSLWDOJDLQRI SHUFHQW The share prices of Jamaica Money Market Brokers and 1DWLRQDO&RPPHUFLDO%DQNUHFRUGHGVL]HDEOHJDLQVRI SHUFHQWDQGSHUFHQWUHVSHFWLYHO\
,Q'HKULQJ%XQWLQJ *ROGLQJEHFDPHWKH¿IWK Jamaican company to be cross-listed on the Trinidad & 7REDJR6WRFN([FKDQJH7KLVWRRNSODFHRQ2FWREHU DQGE\WKHHQGRIWKH\HDUWKHFRPSDQ\¶VVKDUH SULFHKDGUHFRUGHGDGHFOLQHRISHUFHQW
The prospects for another creditable performance in WKH VWRFN PDUNHW IRU DUH IDYRXUDEOH $ VWDEOH macroeconomic environment could allow for a continued UHGXFWLRQLQLQWHUHVWUDWHVZKLFKLQWXUQZRXOGHQKDQFH WKHDWWUDFWLYHQHVVRIWKHVWRFNPDUNHW,QDGGLWLRQWKH ,QLWLDO 3XEOLF 2IIHULQJV that are anticipated during FRXOGIRVWHUJUHDWHUPDUNHWDFWLYLW\ZKLOHDGGLQJ GHSWKWRWKHVWRFNPDUNHW
15 Mayberry Investments Ltd and First Global Financial Services have announced their intentions to list on the Jamaica Stock Exchange in 2005.
The Stock Market 64 6. External Sector Developments
6. 1. Overview SHUFHQWLQGULYHQE\WKHSHUIRUPDQFHRIWKH OREDO HFRQRPLF JURZWK DFFHOHUDWHG E\ WRXULVP VHFWRU 7KH PDMRU IDFWRU FRQWULEXWLQJ WR WKH SHUFHQWDJH SRLQWV WR SHU FHQW LQ performance of the tourism industry was an increase of driven in large part by strong growth in the G SHUFHQWLQWRWDOVWRSRYHUDUULYDOVOHGE\JURZWKLQ major industrialised economies and rapid expansion in DUULYDOVIURP(XURSH8.DQG&DQDGD HPHUJLQJPDUNHWVLQSDUWLFXODU&KLQD:RUOGLQÀDWLRQ DOVRDFFHOHUDWHGGXULQJWKH\HDUSDUWO\WKHFRQVHTXHQFH ,Q UHVSHFW RI LQWHUQDWLRQDO WUDGH DJUHHPHQWV DIWHU of shocks to oil prices and partly related to the robust JURZWKDPRQJWKHPRUHGHYHORSHGHFRQRPLHV DOPRVWD\HDURIGHDGORFNWKHPHPEHUVRIWKH:RUOG 7UDGH 2UJDQL]DWLRQ :72 DGRSWHG D IUDPHZRUN
The performance of the Jamaican economy in 2004 DJUHHPHQWWKDWVRXJKWWRDGYDQFHWKHJRDOVRIWKH'RKD was set against the background of the advances in 'HYHORSPHQW$JHQGD ''$ )RU -DPDLFD DQG RWKHU JOREDO HFRQRPLF DFWLYLW\ GXULQJ WKH \HDU ,QFUHDVHG $IULFDQ&DULEEHDQDQG3DFL¿F $&3 HFRQRPLHVWKH H[WHUQDOGHPDQGSDUWLFXODUO\IURPWKHPDMRUGHYHORSHG dispute over the preferential access guaranteed by the HFRQRPLHVKDGDSRVLWLYHLPSDFWRQ-DPDLFD¶VEDODQFH (XURSHDQ&RPPXQLW\ (& WRLWVPDUNHWZDVFKDOOHQJHG RISD\PHQWV %23 0RUHVSHFL¿FDOO\WRXULVWDUULYDOV DWWKHOHYHORIWKH:72DQGE\WKH(&¶VSURSRVDOIRUWKH current transfers and bauxite and alumina export UHIRUPRILWVFRPPRQPDUNHWRUJDQL]DWLRQIRUVXJDU HDUQLQJVJUHZDSSUHFLDEO\LQ7KHFXUUHQWDFFRXQW ZDVKRZHYHUQHJDWLYHO\DIIHFWHGE\WKHKLJKSULFHVRQ 6.1.1 International Economic Developments LPSRUWHGJUDLQVDQGFUXGHRLO,QWKHFRQWH[WRIWKHVH 6.1.2. Industrial Countries LQÀXHQFHV WKH FXUUHQW DFFRXQW GH¿FLW LV HVWLPDWHG WR KDYH FRQWUDFWHG E\ 86 PLOOLRQ WR 86 7KH,QWHUQDWLRQDO0RQHWDU\)XQG ,0) LQGLFDWHGWKDW PLOOLRQLQ WKHVLJQL¿FDQWDFFHOHUDWLRQLQJOREDOHFRQRPLFJURZWK was underpinned by a strengthening in demand among The high price of crude oil and imported grains also LQÀXHQFHG WKH LQÀDWLRQ RXWWXUQ IRU -DPDLFD GXULQJ WKHPDMRULQGXVWULDOLVHGHFRQRPLHV7KHVHHFRQRPLHV WKH \HDU 7KH Fuels & Other Household Supplies, as OHGE\WKH8QLWHG6WDWHVRI$PHULFD 86$ UHFRUGHG well as the Housing & Other Housing Expenses of JURZWK LQ UHDO RXWSXW RI SHU FHQW LQ ZKLFK WKH FRQVXPHU SULFH LQGH[ &3, ZHUH WKH PDLQ VXE FRPSDUHV IDYRXUDEO\ ZLWK WKH JURZWK RI SHU FHQW FDWHJRULHVDIIHFWHG UHFRUGHGLQ
Growth in the Jamaican economy was positively *URZWK LQ UHDO *'3 LQ WKH 86$16 DFFHOHUDWHG E\ DIIHFWHG E\ GHYHORSPHQWV LQ WKH LQWHUQDWLRQDO DUHQD SHUFHQWDJHSRLQWVWRSHUFHQWLQUHODWLYHWRWKH 7KHPRVWVLJQL¿FDQWLPSHWXVWRHFRQRPLFH[SDQVLRQLQ JURZWK UHFRUGHG LQ 7KH LQFUHDVH LQ UHDO RXWSXW HPDQDWHGIURPWKHVHUYLFHVVHFWRU9DOXHDGGHG LQWKH86$ZDVOHGE\DUREXVWH[SDQVLRQRISHU LQ PLVFHOODQHRXV VHUYLFHV LQ SDUWLFXODU H[SDQGHG E\ 16 The USA is Jamaica’s main trading partner, accounting for approximately 40.5 per cent of Jamaica’s merchandise trade and 71.8 per cent of its stopover visitor arrivals in 2003. Bank of Jamaica
Table 34
ADVANCED ECONOMIES: EXCHANGE RATES National Currency per unit Annual percent of US$ /1 Change 2003 2004 2003 2004 &DQDGLDQ'ROODU -DSDQHVH
FHQWLQFRQVXPHUVSHQGLQJUHODWLYHWRSHUFHQWLQ 1RWZLWKVWDQGLQJ WKH H[SDQVLRQ LQ UHDO RXWSXW LQ WKH GXHLQSDUWWRHQKDQFHGLQFHQWLYHVIRUSXUFKDVLQJ 86$ JURZWK LQ HFRQRPLF DFWLYLW\ VORZHG GXULQJ WKH DXWRPRELOHV %XVLQHVV LQYHVWPHQW SDUWLFXODUO\ LQ VHFRQG DQG IRXUWK TXDUWHUV RI 7KLV VORZGRZQ HTXLSPHQWDQGVRIWZDUHDOVRLQFUHDVHGGXULQJWKH\HDU was associated with a decline in growth in consumer VXSSRUWHGE\KLVWRULFDOO\ORZLQWHUHVWUDWHV,QDGGLWLRQ VSHQGLQJUHÀHFWLQJKLJKHUHQHUJ\SULFHVDQGWKHZDQLQJ 86H[SRUWVDFFHOHUDWHGGXULQJWKH\HDULQWKHFRQWH[WRI HIIHFWVRIWD[FXWV WKHGHSUHFLDWLRQRIWKH86GROODUDJDLQVWWKHFXUUHQFLHV 'XULQJWKH\HDUWKHYDOXHRIWKH86GROODUIHOOE\DQ RILWVPDLQWUDGLQJSDUWQHUV7KLVJURZWKDOVRUHÀHFWHG DYHUDJHRI SHUFHQWYLVjYLVWKHFXUUHQFLHVRILWVPDLQ DQLPSURYHPHQWLQH[WHUQDOGHPDQGSDUWLFXODUO\IURP trading partnersIROORZLQJDIDOORIDSSUR[LPDWHO\ $VLD SHUFHQWWKHSUHYLRXV\HDU7KHFRQWLQXHGGHSUHFLDWLRQ
Table 35 INDUSTRIAL ECONOMIES Real GDP, Consumer Prices and Unemployment Rates Country GDP Unemployment Rate ,QÀDWLRQ5DWH Current Account Annual % % of Labour Force Annual % (% of GDP) Change Change 2003 2003 2004 2003 2004 2003 86 8. Euro area Canada Japan 6RXUFH 7KH:RUOG(FRQRPLF2XWORRN6HSWHPEHU6WDWLVWLFV2I¿FHVRILQGLYLGXDOFRXQWULHV * Estimates
17 The Great Britain Pound, the Euro, the Yen and the Canadian Dollar.
External Sector Developments 66 Annual Report 2004
LQWKH86GROODUDJDLQVWWKHPDMRUFXUUHQFLHVZDVGULYHQ 6SDLQJUHZVWURQJO\EXWURVHDWVORZHUUDWHVLQ,WDO\DQG PDLQO\E\FRQFHUQVDERXWWKHVXVWDLQDELOLW\RIWKH86 *HUPDQ\7KH H[SDQVLRQ LQ WKH HFRQRPLHV RI )UDQFH FXUUHQW DFFRXQW DQG ¿VFDO GH¿FLWV 7KH ¿VFDO GH¿FLW DQG6SDLQZDVSDUWO\XQGHUSLQQHGE\UREXVWJURZWKLQ ZLGHQHGWRDQHVWLPDWHGSHUFHQWRI*'3IRUWKH FRQVXPHU VSHQGLQJ )RU ,WDO\ DQG *HUPDQ\ D IDOORII \HDUFRPSDUHGZLWKDSSUR[LPDWHO\SHUFHQWLQ in the employment rate negatively affected domestic GXHLQSDUWWRWD[FXWVDQGKLJKHUVSHQGLQJE\WKH86 GHPDQGGXULQJWKH\HDU DGPLQLVWUDWLRQ 7KH 86 ¿VFDO H[SDQVLRQ UHÀHFWHG LQ LQFUHDVHGGRPHVWLFGHPDQGIXHOOHGWKHZLGHQLQJRIWKH ,QÀDWLRQ DPRQJ WKH HFRQRPLHV RI WKH (XUR DUHD FXUUHQWDFFRXQWGH¿FLWWRDSSUR[LPDWHO\SHUFHQWRI UHPDLQHG DW SHU FHQW IRU GHVSLWH KLJKHU RLO *'3FRPSDUHGZLWKSHUFHQWLQ7KHGHFOLQH prices and increases in indirect taxes and government- LQWKHYDOXHRIWKH86GROODUZDVDOVRDVVRFLDWHGZLWK UHJXODWHGSULFHV7KHFRQWDLQPHQWRILQÀDWLRQSUHVVXUHV WKHXQFHUWDLQW\UHODWHGWRWKHRXWFRPHRI86HOHFWLRQV in the region was in part attributed to the appreciation in LQ1RYHPEHUDQGWKHFRQWLQXHGVHFXULW\FRQFHUQV WKH(XURYLVjYLVWKH86GROODU LQ,UDTGXULQJWKH\HDU ,QWKH8QLWHG.LQJGRP 8. UHDORXWSXWH[SDQGHGE\ 7KHDQQXDODYHUDJHLQÀDWLRQUDWHLQWKH86$IRU SHUFHQWLQUHODWLYHWRSHUFHQWLQ ZDVSHUFHQWFRPSDUHGZLWKSHUFHQWIRU Growth in that economy was primarily underpinned by This acceleration was attributed to increases in the price H[SDQVLRQVRISHUFHQWDQGSHUFHQWLQSULYDWH of crude oil as well as the cumulative impact of the FRQVXPSWLRQDQGLQYHVWPHQWVSHQGLQJUHVSHFWLYHO\ GHSUHFLDWLRQRIWKH86GROODU7RFRXQWHUWKHQHJDWLYH HIIHFWV RI ULVLQJ LQÀDWLRQ WKH 86 )HGHUDO 5HVHUYH 'HVSLWH WKH VLJQL¿FDQW LQFUHDVHV LQ RLO SULFHV GXULQJ WLJKWHQHG PRQHWDU\ SROLF\ ¿YH WLPHV GXULQJ WKH \HDU WKH\HDUWKHDQQXDODYHUDJHUDWHRILQÀDWLRQLQWKH8. 7KH86)HGHUDOIXQGVUDWHZDVLQFUHDVHGE\EDVLV UHPDLQHGUHODWLYHO\ORZDWSHUFHQWFRPSDUHGZLWK SRLQWV RYHU WKH \HDU WR SHU FHQW E\ 'HFHPEHU SHUFHQWLQ7KLVZDVLQSDUWWKHUHVXOWRID WLJKWHQLQJLQPRQHWDU\SROLF\E\WKH%DQNRI(QJODQG which increased the repurchase rate by approximately 7KHHFRQRPLHVRIWKH(XURDUHDZKLFKDFFRXQWHGIRU EDVLVSRLQWVWRSHUFHQWLQ DSSUR[LPDWHO\ SHU FHQW RI -DPDLFD¶V PHUFKDQGLVH WUDGHLQH[SDQGHGE\SHUFHQWLQWKHUHYLHZ ,Q WKH FDVH RI &DQDGD ZKLFK DFFRXQWHG IRU \HDUFRPSDUHGZLWKDJURZWKRISHUFHQWLQ DSSUR[LPDWHO\ SHU FHQW RI -DPDLFD¶V PHUFKDQGLVH The accelerated growth in the Euro area was primarily WUDGHLQHFRQRPLFDFWLYLW\H[SDQGHGE\ SHU DWWULEXWHGWRLQFUHDVHVLQH[WHUQDOGHPDQGSDUWLFXODUO\ FHQWLQ*URZWKLQUHDORXWSXWZDVSDUWO\DWWULEXWHG IURP WKH 0LGGOH (DVW 1RWZLWKVWDQGLQJ WKH JHQHUDO WRDSSUR[LPDWHLQFUHDVHVRISHUFHQWDQGSHUFHQW H[SDQVLRQLQHFRQRPLFDFWLYLW\LQWKH(XURDUHDJURZWK LQ LQYHVWPHQW DQG FRQVXPHU VSHQGLQJ UHVSHFWLYHO\ in real output varied markedly among the four major ,Q DGGLWLRQ &DQDGD¶V H[SRUWV RI JRRGV DQG VHUYLFHV HFRQRPLHVRIWKHUHJLRQ'RPHVWLFRXWSXWLQ)UDQFHDQG SDUWLFXODUO\ WR WKH 86$ LQFUHDVHG E\ DSSUR[LPDWHO\
External Sector Developments Bank of Jamaica
SHUFHQWLQDIWHUUHJLVWHULQJDGHFOLQHRI :LWKLQ WKH /DWLQ $PHULFDQ UHJLRQ VWURQJ JURZWK SHUFHQWLQ,QFUHDVHVLQFRPPRGLW\SULFHVODUJHO\ RISHUFHQWDQGSHUFHQWZDVH[SHULHQFHGLQ accounted for the widening of Canada’s current account 9HQH]XHOD DQG 0H[LFR UHVSHFWLYHO\ WKH PDMRU RLO VXUSOXVWR SHUFHQWLQFRPSDUHGZLWKDVXUSOXV H[SRUWHUVZLWKLQWKHUHJLRQ7KHH[SDQVLRQLQHFRQRPLF RISHUFHQWLQ,QÀDWLRQLQ&DQDGDIHOOWR DFWLYLW\ UHÀHFWHG KLJKHU RLO SURGXFWLRQ XQGHUSLQQHG SHUFHQWRYHUWKHFRXUVHRIWKH\HDUUHODWLYHWRSHU E\LQFUHDVHVLQH[WHUQDOGHPDQGIRUWKHFRPPRGLW\DV FHQWLQ ZHOODVDSLFNXSLQGRPHVWLFGHPDQG7KHHFRQRPLHV RI8UXJXD\DQG%UD]LODOVRH[SDQGHGE\SHUFHQW 5HDO*'3LQ-DSDQH[SDQGHGE\SHUFHQWLQ DQGSHUFHQWUHVSHFWLYHO\GXULQJWKH\HDUUHÀHFWLQJ UHODWLYHWRJURZWKRISHUFHQWLQ7KHH[SDQVLRQ UREXVWH[SRUWJURZWKDQGLQFUHDVHVLQGRPHVWLFGHPDQG in real output was associated with increased exports to 7KH'RPLQLFDQ5HSXEOLFZDVWKHVROHFRXQWU\ZLWKLQ $VLDDQGDQH[SDQVLRQLQEXVLQHVVLQYHVWPHQWVSHQGLQJ WKH/DWLQ$PHULFDQUHJLRQWKDWH[SHULHQFHGDGHFOLQHLQ The strong growth in exports also contributed to the UHDORXWSXWGXULQJWKH\HDUWKHUHVXOWRIKLJKRLOSULFHV widening of that country’s current account surplus by DQGWKHFRQWLQXHGDGYHUVHHIIHFWVRIWKH¿QDQFLDOVHFWRU SHUFHQWDJHSRLQWVWRSHUFHQWRI*'3LQ FULVLVRI UHODWLYHWR-DSDQFRQWLQXHGWRH[SHULHQFHQHJDWLYH
LQÀDWLRQRISHUFHQWLQVLPLODUWRWKHUDWHLQ The annual average change in the price index for LQSDUWWKHUHVXOWRIDSHUFHQWDSSUHFLDWLRQLQ /DWLQ$PHULFDQ FRXQWULHV ZDV SHU FHQW LQ WKH\HQYLVjYLVWKH86GROODU FRPSDUHGZLWKSHUFHQWLQ7KLVORZHUUDWH RILQÀDWLRQZDVLQSDUWDWWULEXWHGWRWKHWLJKWHQLQJRI 6.1.3. Developing Economies PRQHWDU\SROLF\LQVHYHUDORIWKHUHJLRQ¶VHFRQRPLHVLQ SDUWLFXODU%UD]LO+RZHYHULQÀDWLRQSUHVVXUHVUHPDLQHG The developing countries also experienced robust UHODWLYHO\KLJKLQWKHUHJLRQGXHLQSDUWWRKLJKHURLO LQFUHDVHV LQ HFRQRPLF DFWLYLW\ *URZWK LQ UHDO JURVV SULFHVDQGH[FKDQJHUDWHGHSUHFLDWLRQVGXULQJWKH\HDU GRPHVWLFSURGXFW *'3 IRUWKLVJURXSZDVSHUFHQW LQUHODWLYHWRSHUFHQWLQ7KHGHYHORSLQJ HFRQRPLHVRIWKH$VLDQUHJLRQH[SHULHQFHGWKHKLJKHVW JURZWK UDWH IXHOOHG SULPDULO\ E\ VWURQJ JURZWK LQ LQYHVWPHQW VSHQGLQJ DQG QHW H[WHUQDO GHPDQG SDUWLFXODUO\IURP&KLQD+RZHYHUWKHPRVWVLJQL¿FDQW acceleration in real output was experienced among the GHYHORSLQJ HFRQRPLHV RI WKH :HVWHUQ +HPLVSKHUH 7KHVH HFRQRPLHV H[SDQGHG E\ DSSUR[LPDWHO\ SHU FHQWLQUHODWLYHWRDSHUFHQWH[SDQVLRQLQ supported by strong growth in exports in the context of LQFUHDVHVLQFRPPRGLW\SULFHVGXULQJWKH\HDU
External Sector Developments 68 Annual Report 2004
Table 36
SELECTED DEVELOPING COUNTRIES REAL GDP & CONSUMER PRICES (ANNUAL PERCENT CHANGE) Country GDP ,QÀDWLRQ5DWH 2003 2003 2004
'HYHORSLQJ&RXQWULHV :HVWHUQ+HPLVSKHUH Latin America $UJHQWLQD Brazil Chile Colombia &RVWD5LFD 'RPLQLFDQ5HSXEOLF Ecuador Mexico Paraguay Uruguay 9HQH]XHOD Caribbean $QWLJXD %DUEXGD Barbados 'RPLQLFD Guyana Jamaica 6W.LWWV1HYLV 6W/XFLD Trinidad & Tobago Developing Asia China ,QGLD ,QGRQHVLD Malaysia Philippines Thailand Sources: The World Economic Outlook, September 2004, Statistics 2I¿FHVRILQGLYLGXDOFRXQWULHV * Estimates, **Annual average
)RU WKH &DULEEHDQ VXEUHJLRQ WKHUH ZDV JURZWK LQ JURZWK ZDV WKH HQHUJ\ VHFWRU ZLWK RLO SURGXFWLRQ HFRQRPLFDFWLYLW\LQGHVSLWHWKHDGYHUVHHIIHFWV LQFUHDVLQJ E\ DSSUR[LPDWHO\ SHU FHQW GXULQJ WKH of the hurricanes that affected the region over the last \HDUFRPSDUHGZLWKDQLQFUHDVHRISHUFHQWLQ half of the year187ULQLGDGDQG7REDJRFRQWLQXHGWR *URZWKLQUHDORXWSXWLQ*X\DQDZDVHVWLPDWHGDW UHFRUG VWURQJ JURZWK LQ GHVSLWH H[SHULHQFLQJ D SHUFHQWLQZKLFKFRPSDUHVIDYRXUDEO\ZLWKWKH GHFHOHUDWLRQ UHODWLYH WR 7KH PDLQ HQJLQH IRU GHFOLQHRISHUFHQWWKHSUHYLRXV\HDU7KLVJURZWK
182I¿FLDOVWDWLVWLFVRQ*UHQDGDDUHXQDYDLODEOHGXHWRWKHLPSDFWRI+XUULFDQH,YDQ,WLVHVWLPDWHGKRZHYHUWKDWWKH*UHQDGLDQHFRQRP\ZLOO H[SHULHQFHDVLJQL¿FDQWGHFOLQHLQUHDORXWSXWLQ3ULRUWRWKHKXUULFDQH*UHQDGDZDVH[SHFWHGWRUHFRUGJURZWKRIDSSUR[LPDWHO\SHU cent in 2004, relative to 2.5 per cent in 2003. External Sector Developments Bank of Jamaica
was related to increases in bauxite and other agricultural workers reduced the export of the commodity during FRPPRGLW\H[SRUWVGXULQJWKH\HDU(FRQRPLFDFWLYLW\ WKH \HDU 7KH WDNHRYHU E\ WKH 5XVVLDQ JRYHUQPHQW LQ%DUEDGRVDQGWKHHFRQRPLHVRIWKH2UJDQLVDWLRQRI RI 19$WUDGHU¶VUHSRUWHGIXWXUHVSRVLWLRQVLQDFRPPRGLW\DUHFODVVL¿HGDVQRQFRPPHUFLDOLIWKHWUDGHUXVHVIXWXUHVFRQWUDFWVLQWKDWSDUWLFXODUFRPPRGLW\IRURWKHU purposes than hedging, for example, speculating. 202SHQLQWHUHVWLVWKHWRWDOQXPEHURIIXWXUHVFRQWUDFWVWKDWKDYHQRWH[SLUHGRUEHHQIXO¿OOHGE\GHOLYHU\ External Sector Developments Annual Report 2004 Table 37 SUMMARY OF WORLD COMMODITY PRICES $QQXDOSHUFHQWFKDQJH 2003 2004 $OO3ULPDU\&RPPRGLWLHV 1RQIXHO&RPPRGLWLHV (GLEOHV D )RRG E %HYHUDJHV ,QGXVWULDO,QSXWV D $JULFXOWXUDO5DZ Materials E 0HWDOV (QHUJ\ 3HWUROHXP Source: IMF Primary Commodity Prices West Texas Intermediate measure VXELQGH[ODUJHO\UHÀHFWHGDSHUFHQWLQFUHDVHLQ 6LQJOH 0DUNHW DQG (FRQRP\ &60( -DPDLFD DOVR WKHSULFHRIULFHDIWHUDGLVDSSRLQWLQJKDUYHVWLQ&KLQD SOD\HGDQLQWHJUDOUROHDWWKHOHYHORIWKH:72'LVSXWHV UHVXOWHGLQDERYHDYHUDJHLPSRUWVWRWKDWFRXQWU\/RZ 6HWWOHPHQW8QGHUVWDQGLQJ '68 V\VWHPDVDWKLUGSDUW\ global rice inventories also supported the increase in to Brazil’s challenge of the European Community’s WKHSULFHRIWKHFRPPRGLW\7KHEHYHUDJHVVXELQGH[ (& FRPPRQPDUNHWRUJDQLVDWLRQIRUVXJDU JUHZE\SHUFHQWLQUHÀHFWLQJDQLQFUHDVHRI SHUFHQWLQWKHDYHUDJHSULFHRIFRIIHH DUDELFD 2Q -XO\ WKH *HQHUDO &RXQFLO RI WKH :72 UHODWLYHWR7KHLQFUHDVHLQFRIIHHSULFHVUHÀHFWHG reached a consensus on framework agreements for 21 increased concerns during the year about Brazilian pursuing the multilateral trade talks :LWK UHJDUG WR ZHDWKHUFRQGLWLRQV DJULFXOWXUH WKH IUDPHZRUN DJUHHPHQW VWLSXODWHG WKH HOLPLQDWLRQRIH[SRUWVXEVLGLHVWKHUHGXFWLRQRIWUDGH 6.1.5. Trade Negotiations distorting domestic support policies and substantial WDULIIUHGXFWLRQV'HYHORSLQJFRXQWULHVZRXOGKRZHYHU 'XULQJ WKH UHYLHZ SHULRG -DPDLFD DORQJ ZLWK RWKHU FRQWLQXH WR EHQH¿W IURP VSHFLDO DQG GLIIHUHQWLDO &$5,&20 FRXQWULHV FRQWLQXHG LWV HQJDJHPHQW LQ WUHDWPHQW 7KH DJUHHPHQW DOVR ODXQFKHG QHJRWLDWLRQV H[WHUQDOWUDGHQHJRWLDWLRQVZKLFKZHUHJHDUHGWRZDUGV RQWUDGHIDFLOLWDWLRQRQHRIWKHIRXU6LQJDSRUHLVVXHV WKHUHDOLVDWLRQRIWKH:72¶V'RKD'HYHORSPHQW$JHQGD with the remaining three issues being removed from ''$ WKH (FRQRPLF 3DUWQHUVKLS $JUHHPHQW (3$ WKHIRUPDODJHQGD7KH³-XO\SDFNDJH´RSHQHGWKHZD\ EHWZHHQ &$5,)2580 FRXQWULHV DQG WKH (XURSHDQ IRUPRUHGHWDLOHGQHJRWLDWLRQVZKLFKDUHVFKHGXOHGWR 8QLRQ (8 DQG WKH HVWDEOLVKPHQW RI WKH &$5,&20 EHJLQLQ 21 The negotiations towards the realisation of the WTO’s DDA had stalled in 2003, as member states were unable to arrive at a consensus on VXEVWDQWLYHFRQFHUQVUHODWHGWRWKHµ6LQJDSRUHLVVXHV¶DQGDJULFXOWXUH7KH6LQJDSRUHLVVXHV¿UVWHPHUJHGLQ DWWKH:720LQLVWHULDO Conference in Singapore. External Sector Developments Bank of Jamaica 7KH&DULEEHDQZDVWKH¿UVWZLWKLQWKH$&3JURXSLQJ ,W LV DQWLFLSDWHG WKDW DOO PHPEHUV RI &$5,&20 ZLOO to hold detailed discussions in 2004 with the EU on the SDUWLFLSDWHLQWKH&60(E\ VFRSHDQGSULRULWLHVRIWKH(3$QHJRWLDWLRQV,WZDVDJUHHG that special and differential treatment should form the 'XULQJWKH\HDU-DPDLFDDORQJZLWKRWKHUPHPEHUVRI FRUHHOHPHQWRIWKH(3$DQGVKRXOGQRWQHFHVVDULO\EH WKH$&3VWDWHVSOD\HGDQDFWLYHOREE\LQJUROHLQWKHVXJDU OLPLWHGWRWKHH[LVWLQJSURYLVLRQVXQGHUWKH:727KH GLVSXWHZKLFKZDVLQLWLDWHGDJDLQVWWKH(&E\%UD]LO reorienting of assistance to address the development ,Q WKH GLVSXWH EHIRUH WKH :72¶V GLVSXWH VHWWOHPHQW RIQHZLQGXVWULHVDVZHOODVROGHURQHVVXFKDVVXJDU SDQHO %UD]LO DOOHJHG WKDW WKH (&¶V H[SRUW VXEVLGLHV DQG EDQDQDV ZDV DOVR GLVFXVVHG 7KHVH GLVFXVVLRQV RQVXJDUH[FHHGHGLWV:72DJUHHGOLPLWDQGFODLPHG formed a precursor to the launch of the second phase of WKDW(&¶VFRPPRQPDUNHWRUJDQLVDWLRQIRUVXJDUVWLÀHG WKH&$5,)2580(8(3$QHJRWLDWLRQVLQ6HSWHPEHU competition and distorted prices on the international 7KLV SKDVH RI WKH QHJRWLDWLRQV LV H[SHFWHG WR PDUNHW 7KH :72¶V GLVSXWH UHVROXWLRQ SDQHO LVVXHG FRQWLQXH XQWLO 6HSWHPEHU ZLWK WKH DLPV EHLQJ D SUHOLPLQDU\ UXOLQJ LQ 6HSWHPEHU LQ IDYRXU RI the establishment of a common understanding on %UD]LO7KHFRQFHUQVDERXWWKHSRWHQWLDOLPSDFWRIWKH the priorities for EU’s support of Caribbean regional erosion of preferences for sugar was heightened during LQWHJUDWLRQ HIIRUWV WKH LGHQWL¿FDWLRQ RI WKH VRXUFHV the year by the EC’s announcement on 14 July 2004 of RI DVVLVWDQFH ZKLFK DUH UHTXLUHG IRU &$5,)2580 its proposal to reform its common market organization FDSDFLW\EXLOGLQJDQGWKHWDUJHWVWREHDWWDLQHGDWWKH IRU VXJDU 7KH UHIRUP SURSRVDO VRXJKW WR PDLQWDLQ time of the agreement’s implementation on 1 January SUHIHUHQWLDODFFHVVIRU$&3VXJDUSURGXFLQJFRXQWULHV ZKLOHUHGXFLQJWKHSULFH$&3H[SRUWHUVUHFHLYHE\PRUH WKDQDWKLUG7KHSURSRVDOZRXOGWDNHHIIHFWIURP-XO\ -DPDLFD 7ULQLGDG 7REDJR DQG %DUEDGRV ³IDVW RQDSKDVHGEDVLVLQWZRVWHSVRYHUWKUHH\HDUVRI tracked” their efforts toward the establishment of the LPSOHPHQWDWLRQ &60(E\HDUO\0HPEHUVWDWHVVRXJKWWRUHPRYH WKH OHJDO DQG DGPLQLVWUDWLYH UHVWULFWLRQV RQ WKH 5LJKW 6.1.6. Prospects for 2005 RI (VWDEOLVKPHQW WKH 3URYLVLRQ RI 6HUYLFHV DQG WKH 0RYHPHQW RI &DSLWDO GXULQJ WKH \HDU )RU -DPDLFD 7KH ,0)¶V :RUOG (FRQRPLF 2XWORRN VXJJHVWV WKDW WKLVZDVUHDOL]HGZLWKWKHSDVVLQJRI&$5,&20 ZRUOGRXWSXWZLOOJURZE\SHUFHQWLQ,WLV $FWZKLFKHVWDEOLVKHGWKHOHJDOLW\RIWKH&$5,&20 anticipated that the advanced economies will expand by &RXUW RI -XVWLFH &&- 22 and the supremacy of the SHUFHQWZKLOHWKHGHYHORSLQJHFRQRPLHVZLOOJURZ requirements of the Treaty of Chaguaramas over E\ SHUFHQWLQ7KLVH[SHFWHGGHFHOHUDWLRQLQ -DPDLFD¶VODZV H[FHSWLQJWKH&RQVWLWXWLRQRI-DPDLFD JURZWKIRUWKHZRUOGHFRQRP\UHODWLYHWRWKHJURZWK DQGWKH&DULEEHDQ&RPPXQLW\ 0RYHPHQWRI)DFWRUV LQ LV DWWULEXWHG WR DQ DQWLFLSDWHG PRGHUDWLRQ %LOOZKLFKDOORZVWKHIUHHPRYHPHQWRISHRSOHVHUYLFHV LQ JURZWK LQ WKH 86$ DQG &KLQD *URZWK LQ WKHVH DQGFDSLWDOZLWKLQWKHUHJLRQDFURVV-DPDLFDQERUGHUV UHVSHFWLYHHFRQRPLHVLQLVH[SHFWHGWRGHFHOHUDWH 22 The CARICOM 2004 Act was subsequently rendered null and void by a ruling of the British Privy Council in February 2005 as to the FRQVWLWXWLRQDOLW\RIWKH&&-DVD¿QDOFRXUWRIDSSHDO External Sector Developments Annual Report 2004 E\ and SHUFHQWDJHSRLQWVWRSHUFHQWDQG 6.2. Balance of Payments SHUFHQW7KHPRGHUDWLRQLQJURZWKLQWKH86$LVVHW against the background of weaker than expected growth -DPDLFD¶V EDODQFH RI SD\PHQWV %23 FRQWLQXHG WR LQUHDORXWSXWGXULQJWKH'HFHPEHUTXDUWHU)RU VWUHQJWKHQ LQ GHVSLWH WKH QHJDWLYH HIIHFWV RI &KLQDWKHDXWKRULWLHVKDYHVRXJKWWRWLJKWHQPRQHWDU\ +XUULFDQH,YDQRQVRPHRIWKHPDMRUIRUHLJQH[FKDQJH policy in an effort to prevent the incipient “overheating” HDUQLQJVHFWRUV7KHLPSURYHPHQWLQ-DPDLFD¶VH[WHUQDO RIWKHHFRQRP\)XUWKHUWLJKWHQLQJLQPRQHWDU\SROLF\ SRVLWLRQ ZKLFK VWDUWHG LQ ZDV LQÀXHQFHG E\ LVH[SHFWHGLQ strong growth in the major developed economies (see International Economic Developments ZKLFKKDGD ,QÀDWLRQ SUHVVXUHV ZLWKLQ WKH ZRUOG HFRQRP\ FRXOG SRVLWLYHLPSDFWRQDOXPLQDH[SRUWVWRXULVPDQGSULYDWH VWUHQJWKHQLQLQDFRQWH[WRIORZVSDUHFDSDFLW\ WUDQVIHUV,QWKLVFRQWH[WWKHFXUUHQWDFFRXQWGH¿FLWLV IRURLOSURGXFWLRQ,QWKLVUHJDUGWKHLQWHUQDWLRQDORLO HVWLPDWHG WR KDYH FRQWUDFWHG E\ 86 PLOOLRQ WR PDUNHWLVH[SHFWHGWRUHPDLQYRODWLOHGXULQJWKH\HDU 86 PLOOLRQ SHUFHQWRI*'3 LQ$Q This could necessitate a further tightening of monetary H[SDQVLRQ RI 86 PLOOLRQ LQ WKH VXUSOXV RQ WKH SROLF\DPRQJWKHDGYDQFHGHFRQRPLHVGXULQJWKH\HDU current transfers account,FRPSOHPHQWHGE\D86 ,QPRVWFDVHVKRZHYHUWKHULVNRIDPDUNHGSLFNXSLQ PLOOLRQ FRQWUDFWLRQ LQ WKH PHUFKDQGLVH WUDGH GH¿FLW, LQÀDWLRQDSSHDUPRGHUDWHJLYHQWKHH[FHVVFDSDFLW\LQ ZHUH WKH PDLQ IDFWRUV LQÀXHQFLQJ WKH LPSURYHPHQW the economies and relatively moderate labour market LQ WKH FXUUHQW DFFRXQW GXULQJ WKH UHYLHZ SHULRG 7KH SUHVVXUHV 7KH RWKHU PDLQ FRQFHUQV IRU WKH JOREDO impact of these changes was partly offset by an increase HFRQRP\ LQFOXGH WKH JURZLQJ 86 FXUUHQW DFFRXQW RI 86 PLOOLRQ LQ QHW SD\PHQWV RQ WKH income GH¿FLW ZKLFK PD\ UHTXLUH IXUWKHU DGMXVWPHQW LQ WKH DFFRXQWDQGDIDOORI86PLOOLRQLQWKHVXUSOXVRQ H[FKDQJHUDWHIRUWKH86GROODUDJDLQVWLWVPDMRUWUDGLQJ the services DFFRXQW SDUWQHUVDQG¿VFDOWLJKWHQLQJGXULQJWKH\HDU $VXUSOXVRI86 PLOOLRQRQWKH¿QDQFLDO account ,Q WKH DUHD RI LQWHUQDWLRQDO WUDGH QHJRWLDWLRQV WKHUH UHÀHFWHGQHWRI¿FLDODQGSULYDWHLQYHVWPHQWLQÀRZVRI appears to be a renewed effort to resume formal 86 PLOOLRQDQG86 PLOOLRQUHVSHFWLYHO\ QHJRWLDWLRQV DW WKH OHYHO RI WKH :72 RQ WKH VSHFL¿F When combined with the capital account surplus of commitments that would lead to a successful conclusion 86PLOOLRQWKHVHÀRZVZHUHPRUHWKDQVXI¿FLHQWWR RIWKH''$7KHUHDOVRDSSHDUVWREHDGHHSHUUHFRJQLWLRQ ¿QDQFHWKHGH¿FLWRQWKHcurrent account&RQVHTXHQWO\ by both developed and developing countries of the need the net international reserves of Jamaica increased by WR SURWHFW VHQVLWLYH DQG VSHFLDO SURGXFWV +RZHYHU 86 PLOOLRQLQ see Table 38 IRU-DPDLFDDQGWKHRWKHU$&3FRXQWULHVWKHRXWORRN IRU VSHFL¿F QHJRWLDWLRQV UHODWHG WR WKH SURWHFWHG$&3 PDUNHWVLQWKH(8UHPDLQVXQFHUWDLQ External Sector Developments Bank of Jamaica Table 38 SUMMARY OF BALANCE OF PAYMENTS (US$M) 1/ 1/ 2/ 2002 2003 2004 Change CURRENT ACCOUNT -1073.9 -763.4 -699.5 63.9 A. GOODS BALANCE -1870.3 -1942.2 -1939.9 2.3 ([SRUWV IRE ,PSRUWV IRE B. SERVICES BALANCE 315.0 561.1 560.6 -0.5 Transportation Travel 2WKHU6HUYLFHV GOODS & SERVICES BALANCE -1555.3 -1381.1 -1379.2 1.8 C. INCOME -605.5 -571.4 -651.2 -79.8 Compensation of employee ,QYHVWPHQWLQFRPH D. CURRENT TRANSFERS 1086.9 1189.1 1330.9 141.8 General Government 2WKHU6HFWRUV 2. CAPITAL & FINANCIAL A/C 1073.9 763.4 699.5 -63.9 A. CAPITAL ACCOUNT -16.9 -0.3 3.0 3.3 General government 2WKHU6HFWRUV B. FINANCIAL ACCOUNT 1090.8 763.7 696.5 -67.2 2WKHU2I¿FLDO,QYHVWPHQW 2WKHU3ULYDWH,QYHVWPHQWV 5HVHUYHV 1/ Revised 2/ Estimates 3/ Includes Errors & Omissions 4/ Minus denotes increase 6.2.1. Merchandise Trade General merchandise H[SRUWV YDOXHG DW 86 million, continued to account for the largest portion of Exports WRWDOH[SRUWVZKLOHfreezone exports and goods procured Total earnings from merchandise exports were estimated in ports by foreign carriers WRWDOOHG86PLOOLRQ DW86PLOOLRQ SHUFHQWRI*'3 LQ DQG86PLOOLRQUHVSHFWLYHO\ see Table 39 External Sector Developments Annual Report 2004 Table 39 TRADITIONAL & NON-TRADITIONAL EXPORTS (US$M) 1/ 2/ 2003 2004 Change % Change GENERAL MERCHANDISE EXPORTS 1196.0 1411.2 215.2 18.0 '20(67,&(;32576 Major Traditional Exports Bauxite $OXPLQD 6XJDU Bananas 2WKHU7UDGLWLRQDO([SRUWV Citrus Cocoa Coffee Pimento 5XP Gypsum 1RQ7UDGLWLRQDO([SRUWV 5((;32576 FREEZONE EXPORTS 141.7 126.8 -14.9 -10.5 GOODS PROC. IN PORTS 48.0 48.0 0.0 0.0 GRAND TOTAL 1385.7 1586.1 200.4 14.5 5HYLVHG (VWLPDWHV (DUQLQJVIURPPHUFKDQGLVHH[SRUWVJUHZE\SHU from freezone exports :LWKLQ general merchandise FHQWLQIROORZLQJJURZWKRISHUFHQWLQ exports UHVSHFWLYH H[SDQVLRQV RI 86 PLOOLRQ (see Chart 16 7KHJURZWKLQH[SRUWVZDVLQÀXHQFHG 86 PLOOLRQ DQG 86 PLOOLRQ ZHUH UHFRUGHG E\DSHUFHQW 86PLOOLRQ H[SDQVLRQLQWKH for major traditional exports non-traditional exports value of general merchandise exportsSDUWO\RIIVHWE\ and re-exports DSHUFHQW 86 PLOOLRQ GHFOLQHLQHDUQLQJV External Sector Developments Bank of Jamaica The growth in earnings from major traditional exports SHUFHQWLQH[SRUWVLQWKH'HFHPEHUTXDUWHU7KLV UHÀHFWHG UHVSHFWLYH H[SDQVLRQV RI 86 PLOOLRQ GHFOLQHUHSUHVHQWHGDQSHUFHQWDJHSRLQWVGHFOLQHLQ DQG86PLOOLRQLQUHFHLSWVIURPDOXPLQDDQGVXJDU FDSDFLW\XWLOL]DWLRQWRSHUFHQWIRUWKH\HDU([SRUWV (DUQLQJVIURPEDX[LWHDQGEDQDQDH[SRUWVKRZHYHUIHOO during the quarter was affected by technical problems E\86 PLOOLRQDQG86PLOOLRQUHVSHFWLYHO\ as well as hurricane damage to the loading facility at The performance of alumina exports during 2004 was WKH6W$QQ%DX[LWH&RPSDQ\ see Production ZKLFK DWWULEXWHGWRUHVSHFWLYHLQFUHDVHVRI SHUFHQWDQG reduced exports in the quarter to the lowest level in a SHUFHQWLQWKHDYHUDJHSULFHRIWKHRUHDQGYROXPHV decade (see Chart 16 H[SRUWHG+LJKHUDOXPLQDSULFHVLQZHUHODUJHO\ LQÀXHQFHGE\UREXVWGHPDQGIRUDOXPLQLXPDVVRFLDWHG 7KHYDOXHRIVXJDUH[SRUWVDPRXQWHGWR86 PLOOLRQ ZLWKZRUOGHFRQRPLFJURZWKHVSHFLDOO\LQ&KLQD7KH LQUHSUHVHQWLQJDSHUFHQWLQFUHDVHUHODWLYH growth in the volume of alumina exports was facilitated WRWKHOHYHORIHDUQLQJVLQ([SRUWYROXPHVDQGWKH by a 400 000 tonne expansion in the capacity of the DYHUDJHUHDOLVHGSULFH $53 SHUWRQQHRIVXJDUZHUH VHFWRUGXULQJWKHUHYLHZ\HDU+RZHYHULQWKHFRQWH[W HVWLPDWHGWRKDYHH[SDQGHGE\SHUFHQWDQG RIGHOD\VLQSURGXFWLRQDVVRFLDWHGZLWK+XUULFDQH,YDQ SHU FHQW UHVSHFWLYHO\ 7KH JURZWK LQ H[SRUW YROXPHV FDSDFLW\ XWLOL]DWLRQ GHFOLQHG WR SHU FHQW LQ was associated with improvements in both the quality IURP SHUFHQWLQ DQGTXDQWLW\RIVXJDUFDQHPLOOHG7KHLPSURYHPHQWLQ the quality of the crop was evidenced by a decline in /RZHUHDUQLQJVIURPEDX[LWHH[SRUWVLQUHODWLYHWR WKHWRQQHVFDQHWRWRQQHVVXJDU 7&76 UDWLRWR ODUJHO\UHÀHFWHGDSHUFHQWGHFOLQHLQH[SRUW LQIURPLQ3URGXFWLRQDQGH[SRUWIRU YROXPHVPRVWRIZKLFKZDVDWWULEXWHGWRDIDOORI WKH\HDUZHUHQRWDIIHFWHGE\WKHSDVVDJHRI+XUULFDQH External Sector Developments Annual Report 2004 ,YDQLQ6HSWHPEHUJLYHQWKDWWKHFURS\HDUHQGHG JRRGV H[SRUWV 7KH HVWLPDWHG SHU FHQW LQFUHDVH LQ -XO\ 7KH LQFUHDVH LQ WKH$53 SDUWO\ UHÀHFWHG WKH in re-exports was partly associated with the export of DSSUHFLDWLRQLQWKH(XURYLVjYLVWKH86GROODUGXULQJ SHWUROHXPGHULYDWLYHVE\3HWURMDPWRWKH86$ 2004 (see International Economic Developments Imports Earnings from banana exports were estimated to have 7KHUHZDVDQLQFUHDVHRI86PLOOLRQ RUSHU FRQWUDFWHGE\86PLOOLRQ SHUFHQW LQ FHQW LQWRWDOVSHQGLQJRQPHUFKDQGLVHLPSRUWV FLI UHODWLYHWR7KHIDOORIILQHDUQLQJVIURPEDQDQDLQ LQ 7KLV LQFUHDVH ZDV LQÀXHQFHG SULPDULO\ E\ D ODUJHO\UHÀHFWHGDSHUFHQWGHFOLQHLQH[SRUW 86 PLOOLRQ H[SDQVLRQ LQ general merchandise YROXPHVSULQFLSDOO\DVVRFLDWHGZLWKWKHGHVWUXFWLRQRI imports ZKLFK ZDV SDUWO\ RIIVHW E\ D GHFOLQH RI WKHFURSE\+XUULFDQH,YDQ$VDUHVXOWWKHUHZDVQR 86PLOOLRQLQfreezone imports (see Table 40 7KH H[SRUWRIWKHIUXLWLQWKH'HFHPEHUTXDUWHU expansion in general merchandise imports principally UHÀHFWHG LQFUHDVHG LPSRUWV RI PDQXIDFWXUHG JRRGV Total earnings from non-traditional exportsURVHE\ IRRG PLQHUDO IXHOV DQG PLVFHOODQHRXV PDQXIDFWXUHG SHUFHQWLQPDLQO\UHÀHFWLQJLQFUHDVHGHDUQLQJV JRRGV7KHVHLQFUHDVHVZHUHSDUWLDOO\RIIVHWE\DGHFOLQH IURPFKHPLFDOVPLQHUDOIXHOVDVZHOODVPDQXIDFWXUHG LQWKHYDOXHRIFKHPLFDOLPSRUWV External Sector Developments Bank of Jamaica Table 40 VALUE OF IMPORTS BY SITC (C.I.F.) (US$M) 1/ 2/ 2003 2004 Change % Change GENERAL MERCHANDISE IMPORTS 3678.9 3927.2 248.3 6.7 %(9(5$*( 72%$&&2 &58'(0$7(5,$/6 0,1(5$/)8(/6 $1,0$/ 9(*(7$%/(2,/ &+(0,&$/6 0$18)$&785('*22'6 0$&+,1(5< 75$163257(4837 0,6&(//$1(2860$18)$&785('*22'6 0,6&(//$1(286&2002',7,(6 %(9(5$*( 72%$&&2 FREEZONE 94.3 66.7 -27.6 -29.3 GOODS PROC. IN PORTS 76.2 76.8 0.6 0.8 GRAND TOTAL 3849.4 4070.6 221.3 5.7 5HYLVHG 3URYLVLRQDO +LJKHU LQWHUQDWLRQDO JUDLQ SULFHV LQ FRQMXQFWLRQ ZLWK $QLQFUHDVHRI86PLOOLRQLQWKHVXUSOXVRQWKH increased importation of agricultural products following travel sub-account served as a partial countervailing WKHKXUULFDQHZHUHSDUWO\UHVSRQVLEOHIRUWKHH[SDQVLRQ LQÀXHQFH RI86 PLOOLRQLQIRRGLPSRUWV,QFUHDVHGVSHQGLQJ Transportation RQPLQHUDOIXHOLPSRUWVZDVDVVRFLDWHGZLWKDSHU 1HWSD\PHQWVIRUtransportationVHUYLFHVHVWLPDWHGDW cent increase in international crude oil prices during 86 PLOOLRQ LQ UHSUHVHQWHG DQ H[SDQVLRQ 2004 (see International Economic Developments RI86 PLOOLRQUHODWLYHWR7KHGHWHULRUDWLRQ The expansion in the value of manufactured goods SULPDULO\ UHÀHFWHG LQFUHDVHG RXWÀRZV RI 86 LPSRUWV SULPDULO\ UHÀHFWHG JURZWK LQ GXUDEOH VHPL PLOOLRQ PDLQO\ UHODWHG WR IUHLJKW FKDUJHV RQ KLJKHU GXUDEOH QRQGXUDEOH DV ZHOO DV RWKHU PLVFHOODQHRXV YROXPHV RI LPSRUWV +LJKHU LQÀRZV ZKLFK VWHPPHG PDQXIDFWXUHGJRRGVLPSRUWV IURPWKHLQFUHDVHGFRQYH\DQFHRIYLVLWRUVWRWKH,VODQG 6.2.2. Services E\WKHQDWLRQDOFDUULHUVHUYHGWRSDUWLDOO\PLWLJDWHWKH LQFUHDVHLQRXWÀRZV 1HW HDUQLQJV IURP services is estimated to have GHFOLQHG E\ 86 PLOOLRQ WR 86 PLOOLRQ LQ Travel 7KLVIDOOSULQFLSDOO\UHÀHFWHGKLJKHUGH¿FLWVRQ The travel VXEDFFRXQW FRQWLQXHG WR JURZ LQ the transportation and other services VXEDFFRXQWV GHVSLWH WKH HIIHFWV RI +XUULFDQH ,YDQ RQ WKH WRXULVP External Sector Developments Annual Report 2004 Table 41 VISITOR ARRIVAL STATISTICS 1/ 2/ 2003 2004 % Change Total Stop-overs 1350284.0 1414786.0 4.8 )RUHLJQ1DWLRQDO6WRSRYHUV Long-stay 6KRUWVWD\ 1RQUHVLGHQW-DPDLFDQVWRSRYHUV Cruise Passengers & Armed Forces 1133411.0 1099773.0 -3.0 Total Visitors 2483695.0 2514559.0 1.2 Gross Estimated Expenditure (US$M) 1355.1 1436.4 6.0 5HYLVHG 3URYLVLRQDO VHFWRU *URVV HDUQLQJV IURP YLVLWRU H[SHQGLWXUH ZDV Growth in stop-over visitor arrivals was associated with HVWLPDWHG WR KDYH LQFUHDVHG E\ SHU FHQW WR 86 increased marketing efforts of the Jamaica Tourist Board PLOOLRQ SHUFHQWRI*'3 LQ+RZHYHU -7% DQG WKH DGGLWLRQ RI QHZ DLUOLIW FDSDFLW\ WR WKH the growth in earnings was partly offset by an increase ,VODQGSDUWLDOO\WKURXJKQHZDLUURXWHVE\&RQWLQHQWDO RI 86 PLOOLRQ LQ WKH H[SHQGLWXUH RI -DPDLFDQV DQG 8QLWHG $LUZD\V ,Q DGGLWLRQ D UHDO GHSUHFLDWLRQ WUDYHOLQJ RYHUVHHV LQFOXGLQJ WHPSRUDU\ ZRUNHUV RI WKH -DPDLFD 'ROODU YLVjYLV WKH FXUUHQFLHV RI DEURDG -DPDLFD¶VPDLQWUDGLQJSDUWQHUVIRVWHUHGLQSDUWE\WKH GHSUHFLDWLRQ RI WKH 86 GROODU YLVjYLV WKH (XUR DQG The overall growth in visitor expenditure resulted WKH 3RXQG 6WHUOLQJ HQJHQGHUHG JURZWK LQ WKH VHFWRU IURPDQLQFUHDVHRISHUFHQWLQWRWDOYLVLWRUDUULYDOV ,Q WKLV FRQWH[W WKHUH ZHUH VWURQJ H[SDQVLRQV RI LQÀXHQFHGSULPDULO\E\DQLQFUHDVHRISHUFHQWLQ SHUFHQW SHUFHQWDQG SHUFHQWLQDUULYDOVIURP VWRSRYHU YLVLWRU DUULYDOV7KH H[SDQVLRQ LQ VWRSRYHU WKH(XURSHDQ8.DQG&DQDGLDQPDUNHWVUHVSHFWLYHO\ DUULYDOV UHÀHFWHG JURZWK RI SHU FHQW LQ IRUHLJQ 9LVLWRUV IURP (XURSH DFFRXQWHG IRU SHU FHQW RI QDWLRQDOVDQGDPDUJLQDOGHFOLQHRISHUFHQWLQQRQ WRWDOVWRSRYHUDUULYDOVLQXSIURPSHUFHQW resident Jamaicans (see Table 41 )RUWKH\HDUFUXLVH LQ7KLVSRVLWLYHO\DIIHFWHGWKHDYHUDJHOHQJWKRI SDVVHQJHU DUULYDOV GHFOLQHG E\ SHU FHQW $YHUDJH VWD\DVZHOODVWKHDYHUDJHH[SHQGLWXUHSHUSHUVRQIRU daily expenditure per stop- over visitor was estimated WKH \HDU 7KHUH ZDV DOVR DQ LQFUHDVH LQ DFWLYLWLHV E\ DW 86 UHSUHVHQWLQJ DQ LQFUHDVH RI SHU FHQW 6SDQLVKKRWHOFKDLQVLQWKH,VODQGDVWKHVHFWRUEHQH¿WHG FRPSDUHGZLWKWKHSUHYLRXV\HDUZKLOHFUXLVHYLVLWRUV from the opening of a 420 room all-inclusive hotel in VSHQW DQ HVWLPDWHG 86 SHU GD\ UHSUHVHQWLQJ 1HJULO DQ LPSURYHPHQW RI SHU FHQW7KH DYHUDJH VWD\ RI VWRSRYHU YLVLWRUV WR WKH ,VODQG UHPDLQHG UHODWLYHO\ FRQVWDQWDWGD\V External Sector Developments Bank of Jamaica The performance of visitor arrivals in 2004 represented ,QFUHDVHG RXWÀRZV IRU other services in 2004 mainly DGHFHOHUDWLRQLQJURZWKUDWHZKHQFRPSDUHGZLWKWKH UHÀHFWHG KLJKHU SD\PHQWV IRU ¿QDQFLDO DQG RWKHU LQFUHDVHRISHUFHQWLQ7KHVORZHUUDWHRI EXVLQHVV VHUYLFHV RI 86 PLOOLRQ DQG 86 growth in stop-over visitor arrivals and the decline in PLOOLRQ UHVSHFWLYHO\ 7KH LQFUHDVH LQ FKDUJHV IRU cruise passenger arrivals occurred in the context of ¿QDQFLDO VHUYLFHV ZDV DVVRFLDWHG ZLWK *RYHUQPHQW¶V WKH SDVVDJH RI +XUULFDQH ,YDQ ZKLFK GDPDJHG KRWHO H[WHUQDO GHEW UDLVLQJ DFWLYLWLHV ZKLOH WKH LQFUHDVH LQ infrastructure as well as caused delays and cancellations RWKHU EXVLQHVV VHUYLFHV UHÀHFWHG DQ H[SDQVLRQ LQ WKH of several scheduled cruise vessels during the second SD\PHQW RI FRPPLVVLRQV E\ WKH WUDYHO VHFWRU :LWK half of the year (see Production UHJDUG WR LQÀRZV D FRQWUDFWLRQ RI 86 PLOOLRQ LQ ¿QDQFLDO VHUYLFHV ZDV UHVSRQVLEOH IRU WKH GHFOLQH The performance of Jamaica’s stop-over arrivals in H[SHULHQFHGLQ 2004 compared favourably with the average growth RI VHOHFWHG &DULEEHDQ FRXQWULHV &XED DQG 6W /XFLD 6.2.3. Income H[SHULHQFHG VWURQJ JURZWK LQ ZKLOH %DUEDGRV income 'RPLQLFDQ 5HSXEOLF DQG 0DUWLQLTXH UHFRUGHG 7KHGH¿FLWRQWKH DFFRXQWRI86PLOOLRQ expansions of similar magnitudes to Jamaica (see Table LQ VXUSDVVHG WKH GH¿FLW LQ E\ 86 net investment income 42 7KHGHFOLQHLQFUXLVHDUULYDOVWR-DPDLFDZDVIRU PLOOLRQ 7KLV GH¿FLW UHÀHFWHG WKHPRVWSDUWLQFRQWUDVWWRWKHJURZWKH[SHULHQFHGE\ RXWÀRZVRI86PLOOLRQWKHHIIHFWRIZKLFKZDV RWKHULVODQGV SDUWO\ RIIVHW E\ QHW LQÀRZV RI 86 PLOOLRQ IRU compensation of employees (see Table 38 ([SDQVLRQ Other Services RI86PLOOLRQLQQHWinvestment incomeRXWÀRZV 7KHGH¿FLWRQWKHother services sub-account continued ZDVSDUWLDOO\RIIVHWE\DQLQFUHDVHRI86PLOOLRQ WRZLGHQLQ1HWSD\PHQWVIRURWKHUVHUYLFHVZDV LQFRPSHQVDWLRQRIHPSOR\HHVGXULQJWKHUHYLHZ\HDU HVWLPDWHG DW 86 PLOOLRQ LQ D 86 The deterioration in the investment income account was PLOOLRQLQFUHDVHUHODWLYHWR7KLVZDVLQÀXHQFHG SULPDULO\DVVRFLDWHGZLWKSUR¿WUHPLWWDQFHVE\IRUHLJQ E\ DQ H[SDQVLRQ RI 86 PLOOLRQ LQ RXWÀRZV WKH GLUHFW LQYHVWPHQW FRPSDQLHV 7KH LQFUHDVHG LQÀRZV effect of which was reinforced by a contraction of via compensation of employees23 occurred despite the 86PLOOLRQLQLQÀRZV HIIHFWRI+XUULFDQH,YDQRQWKHYDULRXVMREFHQWUHV Table 42 Stopover Visitor Arrivals (Selected Caribbean Countries) 2003 2004 % Change Bahamas Barbados &XED 'RPLQLFDQ5HSXEOLF 0DUWLQLTXH 6W/XFLD Total 7,776,123 8,207,756 5.6 23 To Jamaicans working abroad for less than one year. External Sector Developments 80 Annual Report 2004 6.2.4. Current Transfers DVFRQGXLWIRUSHUFHQWRIWRWDOUHPLWWDQFHVLQ UHSUHVHQWLQJDPDUJLQDOGHFOLQHRISHUFHQWUHODWLYH The current transfers DFFRXQWLPSURYHGE\86 WR,QFRQWUDVWWKHVKDUHRILQÀRZVWKURXJKWKH PLOOLRQWR86 PLOOLRQLQUHODWLYHWR ¿QDQFLDOLQVWLWXWLRQVLQFUHDVHGWRSHULQIURP UHVXOWLQJSULPDULO\IURPDSHUFHQWH[SDQVLRQLQ SHU FHQW LQ 7KH SRVWDO DQG other agencies QHWLQÀRZVWRWKHSULYDWHVHFWRU*URVVWUDQVIHULQÀRZV registered declines in their respective shares of total WRWKHSULYDWHVHFWRUURVHE\86 PLOOLRQWR86 LQÀRZV PLOOLRQLQZKLFKZDVSDUWO\RIIVHWE\D SHUFHQWLQFUHDVH RU86PLOOLRQ LQJURVVRXWÀRZV 1HWFXUUHQWWUDQVIHULQÀRZVWRWKH*RYHUQPHQWGHFOLQHG (see Table 43 1RWZLWKVWDQGLQJWKHRYHUDOOJURZWKLQ E\86PLOOLRQWR86PLOOLRQLQ7KLV LQÀRZVIRUWKH\HDUWKHUHZDVDVORZGRZQLQUHPLWWDQFHV SHUIRUPDQFHPDLQO\UHÀHFWHGDQH[SDQVLRQRI86 WRWKH,VODQGLQWKH¿QDOTXDUWHU7KLVZDVGXHSULPDULO\ PLOOLRQLQRXWÀRZVZKLFKZDVSDUWLDOO\RIIVHWE\DULVH WRWKHLPSDFWRI+XUULFDQH,YDQRQ)ORULGDDQG&D\PDQ RI86 PLOOLRQLQJUDQWUHFHLSWVUHODWLYHWR ,VODQGVWZRRIWKHPDLQVRXUFHVRIUHPLWWDQFHV 6.2.5. Capital and Financial Account ,QFUHDVHGFRPSHWLWLRQLQWKHUHPLWWDQFHPDUNHWGXULQJ The capital account UHFRUGHG D VXUSOXV RI 86 DVHYLGHQFHGE\WKHHQWU\RI¿YHQHZSOD\HUVWRWKH PLOOLRQ LQ 7KH ¿QDQFLDO DFFRXQW also recorded LQGXVWU\VHUYHGWRHQKDQFHWKHVHUYLFHSURYLGHGE\WKH D VXUSOXV RI 86 PLOOLRQ UHSUHVHQWLQJ DQ VHFWRU7KHUHPLWWDQFHFRPSDQLHVKRZHYHUFRQWLQXHG SHU FHQW GHFOLQH UHODWLYH WR WKH SUHYLRXV \HDU WRDFFRXQWIRUWKHPDMRUVKDUHRILQÀRZVGHVSLWHWKH (see Table 38 :LWKLQWKH¿QDQFLDODFFRXQWWKHother LQFUHDVHGFRPSHWLWLRQ7KHUHPLWWDQFHFRPSDQLHVDFWHG TABLE 43 CURRENT TRANSFERS (US$M.) 1/ 2/ 2003 2004 Change TOTAL RECEIPTS 1523.5 1724.9 201.4 General Government 3ULYDWH6HFWRU 3RVWDO6\VWHP )LQDQFLDO6\VWHP 5HPLWWDQFH&RPSDQLHV 2WKHU TOTAL PAYMENTS 334.4 393.9 59.5 General Government 3ULYDWH6HFWRU )LQDQFLDO6\VWHP 2WKHU NET CURRENT TRANSFERS 1189.1 1330.9 141.8 1/ Revised 2/ Estimates External Sector Developments 81 Bank of Jamaica RI¿FLDOLQYHVWPHQWVVXEDFFRXQWUHFRUGHGDQHWLQÀRZ WKH RI¿FLDO LQYHVWPHQW DQG WKH capital DFFRXQW ZDV RI86 PLOOLRQLQUHODWLYHWRDQHWRXWÀRZ PRUHWKDQVXI¿FLHQWWR¿QDQFHWKHGH¿FLWRQWKHcurrent RI 86 PLOOLRQ LQ WKH SUHYLRXV \HDU ,QÀXHQFHG account$VDFRQVHTXHQFHWKHQHWLQWHUQDWLRQDOUHVHUYHV E\ IDYRXUDEOH LQWHUQDWLRQDO PDUNHW FRQGLWLRQV JURVV RIWKHFRXQWU\H[SDQGHGE\86 PLOOLRQWR86 LQYHVWPHQWLQÀRZVWRWKLVVHFWRUH[SDQGHGE\86 PLOOLRQDWWKHHQGRI PLOOLRQWR86 PLOOLRQLQ7KUHH(XURERQGV WRWDOOLQJ86PLOOLRQZHUHLVVXHGGXULQJWKH\HDU The growth in the stock of Jamaica’s gross foreign ZKLOH DQ H[LVWLQJ (XURERQG ZDV UHRSHQHG LQ $SULO DVVHWVGXULQJODUJHO\UHÀHFWHGDVXEVWDQWLDOEXLOG UDLVLQJ 86 PLOOLRQ *URVV RI¿FLDO SD\PHQWV RI XS LQ %DQN RI -DPDLFD¶V 1,5 SDUWO\ DVVRFLDWHG ZLWK 86 PLOOLRQ LQFOXGLQJ D PDWXULQJ (XURERQG RI *RYHUQPHQW¶V86GROODUERUURZLQJDFWLYLWLHVRQERWK 86 PLOOLRQ ZHUH PDUJLQDOO\ DERYH WKH OHYHO WKHORFDODQGLQWHUQDWLRQDOFDSLWDOPDUNHWV7KHOHYHORI UHFRUGHGLQ JURVVUHVHUYHVIRU-DPDLFDDWWKHHQGRI'HFHPEHU VWRRGDW86PLOOLRQUHSUHVHQWLQJDQHVWLPDWHG 1HWSULYDWHLQYHVWPHQWVLQÀRZVJUHZE\SHUFHQW ZHHNVRIJRRGVLPSRUWVRUZHHNVRILPSRUWHG WR86 PLOOLRQLQUHÀHFWLQJIRUHLJQGLUHFW JRRGVDQGVHUYLFHV DQGSRUWIROLRLQYHVWPHQWVÀRZVDVZHOODVVXEVWDQWLDO ERUURZLQJ E\ *RYHUQPHQW RQ WKH ORFDO PDUNHW 7KLV VXUSOXV FRPELQHG ZLWK RYHUDOO SRVLWLYH EDODQFHV RQ Table 44 OTHER OFFICIAL INVESTMENT FLOWS (US$M) 1/ 2/ 2003 2004 Change GROSS OFFICIAL INFLOWS 113.4 960.2 846.8 'RQRU&RXQWULHV 0XOWLODWHUDO,QVWLWXWLRQV 2WKHU$VVLVWDQFH Project Loan GROSS OFFICIAL OUTFLOWS 477.1 481.0 3.9 *RYHUQPHQW'LUHFW Bank of Jamaica NET OFFICIAL INVESTMENTS -363.8 479.2 843.0 5HYLVHG 3URYLVLRQDO External Sector Developments 82 Annual Report 2004 TABLE 45 FOREIGN EXCHANGE RESERVES (US$M) As at December 31 1/ 2/ 2003 2004 Change GROSS FOREIGN ASSETS 1200.0 1885.6 685.6 Bank of Jamaica Central Government 2WKHURI¿FLDO,QVWLWXWLRQV GROSS FOREIGN LIABILITIES 31.3 23.4 -7.9 OFFICIAL NET INTERNATIONAL RESERVES 1168.7 1862.2 693.5 Weeks of estimated imports of Goods and services 1/ Revised 2/ Provisional 6.3. Foreign Exchange Management 6.3.1. Bank of Jamaica International Reserves 7KHQHWLQWHUQDWLRQDOUHVHUYHV 1,5 RIWKH%2-JUHZ 7RWDOIRUHLJQOLDELOLWLHVGHFOLQHGWR86PLOOLRQDW E\ 86 PLOOLRQ WR 86 PLOOLRQ GXULQJ WKHHQGRIIURP86PLOOLRQDWWKHHQGRI 7KH 1,5 LQFUHDVHG GXULQJ HYHU\ TXDUWHU RI 'HFHPEHU 7KH UHGXFWLRQ UHÀHFWHG SD\PHQWV RI ZLWKWKHPRVWVLJQL¿FDQWLQFUHDVHRI86 86 PLOOLRQWRWKH,0)GXULQJ million occurring in the March quarter (See Table 46 6LJQL¿FDQW SXUFKDVHV IURP WKH PDUNHW DFFRXQWHG IRU WKLVLQFUHDVHLQWKHVWRFN External Sector Developments 83 Bank of Jamaica Table 46 )RUHLJQ([FKDQJH,QÀRZVDQG2XWÀRZV ,QÀRZV )RUHLJQH[FKDQJHLQÀRZVWRWKH%2-IRUWRWDOOHG PLOOLRQRUSHUFHQWRIWRWDOLQÀRZV7KLVLQFOXGHV 86 PLOOLRQ DQ LQFUHDVH RI 86 PLOOLRQ 86 PLOOLRQ SXUFKDVHG XQGHU WKH VXUUHQGHU UHODWLYHWR7KHPDLQVRXUFHVRILQÀRZVZHUHWKH arrangement24DQG86PLOOLRQSXUFKDVHGGLUHFWO\ SXUFKDVHV RI *RYHUQPHQW¶V IRUHLJQ FXUUHQF\ UHFHLSWV IURPWKHPDUNHW IXQGV IURP WKH EDX[LWH VHFWRU DV ZHOO DV IURP WKH domestic market (see Table 47 Purchases from the bauxite sector during 2004 were 86PLOOLRQSHUFHQWORZHUWKDQLQ7KH 3XUFKDVHV IURP *2- JUDQW DQG ORDQ ÀRZV ZHUH ORZHULQÀRZVZHUHLQDFRQWH[WZKHUHSURGXFWLRQZDV 86 PLOOLRQ DFFRXQWLQJ IRU SHU FHQW RI LQWHUUXSWHGIROORZLQJWKHSDVVDJHRI+XUULFDQHV&KDUOLH WRWDO LQÀRZV$QRWKHU FRQWULEXWRU WR IRUHLJQ FXUUHQF\ DQG,YDQLQWKH6HSWHPEHUTXDUWHUDQGGDPDJHWRWKH LQÀRZVZDVPDUNHWSXUFKDVHV7KHVHYROXPHVUHPDLQHG ORDGLQJ IDFLOLW\ DW 6W$QQ %DX[LWH /LPLWHG IRUPHUO\ VLJQL¿FDQW GXULQJ DFFRXQWLQJ IRU 86 .DLVHU%DX[LWH LQWKH'HFHPEHUTXDUWHU 24 Under the surrender arrangement, Authorised Dealers and Cambios agree to sell to the BOJ 5% – 10% of their purchases from the Clients segment of the market. External Sector Developments 84 Annual Report 2004 Table 47 SOURCES OF FOREIGN EXCHANGE US$MN ,QÀRZV Change 2003 2004 ($) (%) Exports & Services 837.2 820.9 -16.4 -2.0 %DX[LWH5HFHLSWV Direct Purchases 647.8 662.4 14.5 2.2 6XUUHQGHUWR%2- - authorised dealers - cambios 2WKHUSXUFKDVHV Purchase of GOJ Loan Proceeds 410.1 1124.7 714.6 174.2 - Eurobond - /RFDO5HJLRQDO86ERQG 2WKHUORDQV Grants - 'LYHVWPHQW 2WKHU5HFHLSWV 7RWDO&DVK,QÀRZ 1360.5 2112.0 751.5 55.2 * - includes income earned on foreign assets and funds lodged to sundry GOJ accounts at the BOJ External Sector Developments Bank of Jamaica 2XWÀRZV 6.3.2. Reserve Management 7RWDO IRUHLJQ FXUUHQF\ RXWÀRZV RI 86 6.3.2.1.Performance PLOOLRQ GXULQJ ZHUH 86 PLOOLRQ ORZHU WKDQ)RUHLJQFXUUHQF\GHEWSD\PHQWVRQEHKDOI 7KH%DQNRI-DPDLFD¶VIRUHLJQDVVHWVWRWDOOHG86 RIWKH*RYHUQPHQWDPRXQWHGWR86 PLOOLRQ PLOOLRQDW'HFHPEHU86PLOOLRQDERYH DFFRXQWLQJIRUSHUFHQWRIWRWDORXWÀRZV WKHOHYHODWWKHHQGRI)RUHLJQLQYHVWPHQWLQFRPH LQDPRXQWHGWR86PLOOLRQDQLQFUHDVHRI ,QDUHODWLYHO\VWDEOHIRUHLJQH[FKDQJHPDUNHWGXULQJ 86PLOOLRQUHODWLYHWRWKHDPRXQWHDUQHGLQ WKH %DQN VROG 86 PLOOLRQ WR WKH PDUNHW The 32 per cent increase in average holdings of foreign FRPSDUHG WR 86 PLOOLRQ GXULQJ see DVVHWVZDVPDLQO\UHVSRQVLEOHIRUWKHLQFUHDVHGHDUQLQJV Table 48 ,QFRPHHDUQHGRYHUWKHSHULRGWUDQVODWHGWRDUHWXUQRQ Table 48 External Sector Developments 86 Annual Report 2004 Table 49 Foreign Investment Income For Year Ended 31 December 2003 2004 ASSETS US$M % US$M % (XUR'ROODU'HSRVLWV %RQG+ROGLQJV External Fund 2WKHU TOTAL 3RUWIROLR5HWXUQ 3.13 2.70 $YHUDJH,QFRPH(DUQLQJ$VVHWV 1 198 1 585 6.3.2.2. Asset Distribution LQYHVWPHQWRISHUFHQWSHUDQQXPFRPSDUHGWRD UHWXUQRISHUFHQWSHUDQQXPLQ7KLVZDVGXH 7KH%DQNFRQWLQXHGWRPDLQWDLQDVLJQL¿FDQWSURSRUWLRQ mainly to a reduction in the proportion of holdings of RILWVUHVHUYHVLQ86GROODUGHQRPLQDWHGLQYHVWPHQWV WKHKLJKHU\LHOGLQJERQGVZKLFKLQDYHUDJHG LQÀXHQFHGODUJHO\E\WKHFXUUHQF\VWUXFWXUHRI-DPDLFD¶V per cent of the Bank’s portfolio compared to nearly 40 LQWHUQDWLRQDO FRPPHUFH DQG FDSLWDO ÀRZV Table 50 SHUFHQWLQTable 49 below provides details of shows the distribution of foreign assets by currency at HDUQLQJVE\DVVHWFODVVIRUWKH\HDUVDQG 'HFHPEHUDQG Table 50 Currency Composition of Foreign Assets at 31 December 2003 and 2004 Currency (MN) US$ Equivalent (MN) % Share 2003 2004 2003 2004 2003 2004 US Dollar Euro Pound Sterling Canadian Dollar Yen Other - - TOTAL FOREIGN ASSETS 1 196.33 1 881.93 100.00 100.00 External Sector Developments Bank of Jamaica 6.3.2.3 Investment Strategy 'XULQJWKHVHFRQGTXDUWHUWKHWHQ\HDU7UHDVXU\\LHOG UHYHUVHGWKH¿UVWTXDUWHUGHFOLQHVSLUDOOLQJXSZDUGVE\ $V LQ SUHYLRXV \HDUV DQG FRQVLVWHQW ZLWK WKH %DQN¶V DVPXFKDVEDVLVSRLQWVWRSHUFHQWWKHUHE\ SROLF\ JXLGHOLQHV LQYHVWPHQW LQVWUXPHQWV VXFK DV providing an opportunity for the repositioning of the 8QLWHG 6WDWHV$JHQF\ %RQGV DQG (XURGROODU GHSRVLWV SRUWIROLR GRPLQDWHG WKH SRUWIROLR WKURXJKRXW Table 51 shows the comparative breakdown by asset class at 31 $VWKHVKRUWWHUP)HGHUDO)XQGVUDWHEHJDQWRLQFUHDVH 'HFHPEHUDQG LQ WKH WKLUG TXDUWHU WKH \LHOG RQ WKH WHQ\HDU 86 Treasury note maintained a steady decline to a low of 7KH EHQFKPDUN \HDU 86 7UHDVXU\ \LHOG GHFOLQHG SHUFHQW7KHUHZDVOLPLWHGUHFRYHU\RI\LHOGVLQ VKDUSO\ GXULQJ WKH ¿UVW TXDUWHU PRYLQJ IURP D KLJK the fourth quarter as range trading took place within RISHUFHQWWRDORZRISHUFHQW$VH[SHFWHG DVOLJKWO\HOHYDWHGEDQGRI WRSHUFHQW7KLV this resulted in heavy redemption of callable United led again to a build-up in the short-term sector as the 6WDWHV$JHQF\ERQGVE\WKHLVVXHUV*LYHQWKHORZUH )HGHUDO2SHQ0DUNHW&RPPLWWHH )20& FRQWLQXHGWR LQYHVWPHQWUDWHVDYDLODEOHLQWKHWR\HDUVHFWRURIWKH LQFUHDVHVKRUWWHUPUDWHVE\EDVLVSRLQWVDWHDFKRI curve during that period there was limited replacement LWVVL[ZHHNO\VLWWLQJV RIWKHVHERQGV Table 51 DISTRIBUTION OF INVESTMENTS BY ASSET CLASS at 31 December 2003 2004 ASSET CLASS US$ M % US$ M % Cash BHA Euro Dollar Deposits $XFWLRQ5DWH&HUWL¿FDWHV U.S. Agency Bonds Reserve Fund TOTAL FOREIGN ASSETS 1 196.33 100.00 1 881.93 100.00 External Sector Developments 88 Annual Report 2004 6.3.3. The Foreign Exchange Market 1RWZLWKVWDQGLQJWKHJHQHUDOPDUNHWVWDELOLW\E\PLG May the market was unsettled by investors’ positioning The foreign exchange market was characterized by WR UHSODFH PDWXULQJ SURFHHGV IURP D *2- 86 'ROODU UHODWLYHO\VWDEOHFRQGLWLRQVLQGHVSLWHFRQWLQXLQJ ,QGH[HG %RQG 7KLV HQWDLOHG KHLJKWHQHG GHPDQG IRU increases in world oil prices throughout the year and foreign exchange as investors sought to maintain their WKHLPSDFWRI+XUULFDQH,YDQLQ6HSWHPEHU7KLVZDV KHGJHLQ86GROODUV1RQHWKHOHVVWKLVZDVVKRUWOLYHG manifested in the distinctly lower rate of depreciation in GXHWRWLPHO\LQWHUYHQWLRQE\WKH&HQWUDO%DQN+HQFH WKHYDOXHRIWKH-DPDLFD'ROODUDJDLQVWLWVWKUHHPDMRU WKHH[FKDQJHUDWHGHSUHFLDWHGE\SHUFHQWDQG FRXQWHUSDUWV ± WKH 8QLWHG 6WDWHV GROODU WKH &DQDGLDQ SHUFHQWLQWKH0DUFKDQG-XQHTXDUWHUVUHVSHFWLYHO\ dollar and the Great Britain Pound – relative to previous 7KHVH PRYHPHQWV FRPSDUH IDYRXUDEO\ ZLWK SHU \HDUV $W 'HFHPEHU WKH ZHLJKWHG DYHUDJH FHQWDQGSHUFHQWIRUWKHFRUUHVSRQGLQJTXDUWHUVRI VHOOLQJUDWHIRUWKH-DPDLFD'ROODUYLVjYLVWKH8QLWHG WKHSUHYLRXV\HDU 6WDWHVGROODUZDV86 -DGHSUHFLDWLRQRI SHUFHQWZKHQFRPSDUHGWR86 -DW $WWKHEHJLQQLQJRIWKH6HSWHPEHUTXDUWHUWKHUHZDV HQG'HFHPEHU7KLVUDWHRIGHSUHFLDWLRQZDVWKH D UHHPHUJHQFH RI VRPH GHPDQG SUHVVXUH 7KLV ZDV ORZHVW VLQFH ZKHQ WKH -DPDLFD 'ROODU UHFRUGHG SULPDULO\DWWULEXWHGWRWKHQRQUHLVVXDQFHRID86'ROODU GHSUHFLDWLRQRISHUFHQW)RUWKHZHLJKWHG ,QGH[HG%RQGLQ-XO\IROORZHGE\WZR 86GROODU DYHUDJHVHOOLQJUDWHGHSUHFLDWHGE\ SHUFHQW denominated bonds reissued by the Government in the GRPHVWLF PDUNHW 7KHUH ZDV DOVR HYLGHQFH RI ZLGHU 'XULQJ WKH ¿UVW KDOI RI WKH IRUHLJQ H[FKDQJH spreadsRQIRUHLJQH[FKDQJHWUDQVDFWLRQVDYHUDJLQJ PDUNHW JHQHUDOO\ UHPDLQHG VWDEOH ZLWK WKH -DPDLFD SHUFHQWIRUWKHTXDUWHUUHODWLYHWRWKHDYHUDJHRI 'ROODU UHÀHFWLQJ D GDLO\ DYHUDJH GHSUHFLDWLRQ RI SHUFHQWIRUWKH¿UVWKDOIRIWKH\HDU7KH6HSWHPEHU SHUFHQWUHODWLYHWRSHUFHQWRYHUWKHVDPHSHULRGLQ quarter experienced the largest quarterly depreciation 7KLVRYHUDOOVWDELOLW\ZDVVXSSRUWHGE\LPSURYHG IRUZLWKWKHH[FKDQJHUDWHGHSUHFLDWLQJE\SHU FRQ¿GHQFH LQ PDFURHFRQRPLF PDQDJHPHQW ZLWK D FHQWWRHQGWKHTXDUWHUDW86 - critical element being the Government’s attainment RI D EHWWHUWKDQEXGJHWHG GH¿FLW SHUIRUPDQFH IRU )< 'XULQJ WKH 'HFHPEHU TXDUWHU VXSSO\ UHPDLQHG IDLUO\ 0DUNHWFRQ¿GHQFHZDVVXVWDLQHGWKURXJKRXW buoyant and in contrast to the quarterly outturn in WKH\HDUDVLQHDFKVXFFHVVLYHTXDUWHUWKH*RYHUQPHQW SUHYLRXV\HDUVWKHH[FKDQJHUDWHDSSUHFLDWHGE\SHU FRQWLQXHGWRPHHWLWV¿VFDOWDUJHWV$GGLWLRQDOO\1,5 FHQW7KLVZDVWKH¿UVWTXDUWHUO\DSSUHFLDWLRQVLQFHWKH OHYHOVUHPDLQHGVWURQJRYHUWKHUHYLHZSHULRGKDYLQJ -XQHTXDUWHULQ RISHUFHQW EHHQEROVWHUHGGXULQJWKH¿UVWKDOIRIWKH\HDUE\WKH purchase of proceeds from Government’s international Foreign exchange purchases and sales reported by ERQGLVVXHV authorised dealers and cambios in 2004 were lower 25 Given as a percentage of the buying rate ((sell rate - buy rate) + buy rate) % 100 External Sector Developments Bank of Jamaica WKDQ LQ ZLWK SXUFKDVHV DQG VDOHV UHÀHFWLQJ $XWKRULVHGGHDOHUVLQFUHDVHGWKHLUPDUNHWVKDUHE\ GHFUHDVHVRISHUFHQWDQGSHUFHQWUHVSHFWLYHO\ SHUFHQWDJHSRLQWVGXULQJDFFRXQWLQJIRUSHU (see Table 52 ([FOXGLQJLQWHUYHQWLRQGDLO\SXUFKDVH FHQWRIWKHWRWDOIRUHLJQH[FKDQJHPDUNHWDFWLYLW\ZLWK DQG VDOH YROXPHV GXULQJ DYHUDJHG 86 FDPELRVDFFRXQWLQJIRUWKHUHPDLQGHU PLOOLRQ DQG 86 PLOOLRQ UHVSHFWLYHO\ FRPSDUHG WR86PLOOLRQDQG86PLOOLRQUHSRUWHGIRU 7KHPDUNHWWUDGHGDWDGDLO\DYHUDJHVSUHDGRISHU 7KHVHGHFOLQHVRISHUFHQWDQGSHUFHQWLQ FHQWGXULQJDPDUJLQDOGHFOLQHUHODWLYHWRSHU UHSRUWHGSXUFKDVHVDQGVDOHVUHVSHFWLYHO\ZHUHODUJHO\ FHQWLQ7KLVQDUURZLQJRIWKHWUDGLQJVSUHDGZDV GXH WR UHGXFHG LQWHUGHDOHU WUDGLQJ ZKLFK DYHUDJHG indicative of the favourable conditions that obtained 86PLOOLRQDQG86PLOOLRQGDLO\FRPSDUHG LQWKHIRUHLJQH[FKDQJHPDUNHWGXULQJWKH\HDU,QD WR86PLOOLRQDQG86PLOOLRQGDLO\LQ context where the imbalances were less evident than the 'HVSLWHWKHPDUJLQDOGHFOLQHLQWUDGLQJYROXPHVUHODWLYH SUHYLRXV\HDUWKH%DQNVROG86 PLOOLRQUHODWLYH WRWKHUHZDVDJHQHUDOLQFUHDVHLQWKHVXSSO\WR WR86 PLOOLRQLQ WKHPDUNHWIURPQHWHDUQHUVZKLFKFRUUHVSRQGHGZLWK VWURQJ ÀRZV IURP WRXULVP DQG UHPLWWDQFHV ,Q WKDW 7KH VWDELOLW\ QRWHG GXULQJ ZDV DOVR LQÀXHQFHG UHJDUG VXSSO\ IURP QHW HDUQHUV DYHUDJHG 86 by the opportunities that emerged for institutions to PLOOLRQGDLO\UHODWLYHWR86PLOOLRQLQZLWK FRQGXFWDUELWUDJHRUFURVVFXUUHQF\WUDQVDFWLRQV,QWKLV WKHKLJKHVWGDLO\VXSSO\RFFXUULQJGXULQJWKH'HFHPEHU UHJDUGWKHTXDQWXPRIQHWVDOHVLQ86'ZDVIUHTXHQWO\ TXDUWHUZKHQLWDYHUDJHG86PLOOLRQ see Table PDWFKHG ZLWK QHW SXUFKDVHV LQ *%3 ZKLFK ZRXOG 53 7KHGHPDQGIRUIRUHLJQFXUUHQF\EDVHGRQVDOHV suggest that funds sourced through cross-trades may WRHQGXVHUVUHPDLQHGVWURQJGXULQJWKH\HDUDYHUDJLQJ KDYHFRQWULEXWHGWRWKHEXR\DQF\LQ86OLTXLGLW\LQWKH 86PLOOLRQGDLO\UHODWLYHWR86 PLOOLRQLQ GRPHVWLFPDUNHW7KHJHQHUDOO\EXR\DQW86'OLTXLGLW\ and market stability would have encouraged end-users Table 52 External Sector Developments Annual Report 2004 Table 52 * Data excludes BOJ Intervention WRDGRSWDGHPDQGVWUDWHJ\WKDWUHÀHFWHGWKHLURSWLQJ x Enhancements to the Bank of Jamaica WRDFTXLUH86GROODUVDWWKHWLPHRIQHHGPDNLQJWKH 2SHUDWLQJ*XLGHOLQHV DOORFDWLRQRIDYDLODEOHIRUHLJQFXUUHQF\PRUHHI¿FLHQW Cambios were sensitized to the proposed amendments 6.3.4 Cambio Licensing & Monitoring to the money laundering legislation and counter- ¿QDQFLQJRIWHUURULVPWHFKQLTXHVWKURXJKWKHLVVXDQFH The cambios continued to provide an effective means RI UHYLVHG *XLGDQFH 1RWHV WR DOO %DQN RI -DPDLFD through which foreign exchange was traded as OLFHQFHHVLQ$XJXVW,QUHFRJQLWLRQRIWKHIXQGDPHQWDO evidenced by the maintenance of approximately one- difference between cambio operations and deposit- WKLUG RI WKH IRUHLJQ H[FKDQJH PDUNHW 7KURXJKRXW WDNLQJ LQVWLWXWLRQV D VHFWLRQ VSHFL¿FDOO\ GHVLJQHG IRU WKH \HDU WKH &HQWUDO %DQN FRQWLQXHG WR GLVFKDUJH LWV cambios and remittance companies was included in the supervisory responsibility through semi-annual on-site UHYLVHG*XLGDQFH1RWHV7KLVVHFWLRQDGGUHVVHG.QRZ LQVSHFWLRQV ,Q WKDW UHJDUG D WRWDO RI LQVSHFWLRQV External Sector Developments Bank of Jamaica required for existing cambios seeking renewal of their WKHUHZHUHFDPELRVUHSUHVHQWLQJHQWLWLHV7KHVH OLFHQFHV 7KH DVVHVVPHQW RI VLJQL¿FDQW VKDUHKROGHUV FDPELRVZHUHGLVWULEXWHGDFURVVWKHLVODQGZLWKSHU GLUHFWRUV DQG PDQDJHUV RI FDPELRV XQGHU WKH %2-¶V FHQWLQWKHSDULVKHVRI.LQJVWRQDQG6W$QGUHZ µ)LWDQG3URSHU¶FULWHULDFRQWLQXHGLQ$WRWDORI SHUFHQWLQ6W-DPHVDQGSHUFHQWLQ6W$QQEHLQJ SHUVRQVZHUHDVVHVVHG WKHDUHDVRIJUHDWHVWFRQFHQWUDWLRQ7KHVHSHUFHQWDJHV FRPSDUH WR DQG UHVSHFWLYHO\ LQ ,Q QHZ FDPELR ORFDWLRQV ZHUH DSSURYHG (see Table 55 Twenty-two cambio locations were closed (see Table 54 RIZKLFKYROXQWDULO\VXUUHQGHUHGWKHLUOLFHQFHV 6.3.5. Remittance Licensing & Monitoring while the other licence was revoked for non-compliance ,Q NHHSLQJ ZLWK WKH LQWHUQDWLRQDO WKUXVW RI UHJXODWLQJ ZLWK WKH %2-¶V 2SHUDWLQJ *XLGHOLQHV DQG WKH PRQH\ LQVWLWXWLRQVSURYLGLQJ¿QDQFLDOVHUYLFHVDOLFHQVLQJDQG ODXQGHULQJOHJLVODWLRQ&RQVHTXHQWO\DWWKHHQGRI Table 54 Table 54 External Sector Developments Annual Report 2004 regulatory regime for companies which offer remittance DUHEHLQJSURFHVVHGE\WKH%2-(DFKSULPDU\DJHQW VHUYLFHVLQ-DPDLFDZDVLQWURGXFHGLQ)HEUXDU\ offers the service through various branches and sub- 7KH %2- ZDV DXWKRUL]HG WR GLVFKDUJH WKLV UHJXODWRU\ DJHQWVIURPORFDWLRQVLVODQGZLGHZLWK function by way of an amendment to the Bank of SHUFHQW ORFDWHGLQ.LQJVWRQ 6W$QGUHZ see Chart -DPDLFD $FW %\ YLUWXH RI WKH IDFW WKDW FRPSDQLHV 17 7KHSULPDU\DJHQWVZHUHDOORZHGWRFRQWLQXHWR which offer remittance services were designated RSHUDWHDWWKHVHORFDWLRQVSHQGLQJLVVXHRIWKHOLFHQFHV ¿QDQFLDO LQVWLWXWLRQV HIIHFWLYH -DQXDU\ WKH\ +RZHYHU SULRU DSSURYDO ZLOO EH UHTXLUHG WR RSHUDWH were previously subject to the requirements under the from any location for which an application was not PRQH\ODXQGHULQJOHJLVODWLRQ VXEPLWWHGSULRUWRWKHGHDGOLQHGDWHRI2FWREHU ,Q DGGLWLRQ FRPSDQLHV QRW FXUUHQWO\ EHLQJ SURFHVVHG ,QRUGHUWRIXO¿OOWKLVPDQGDWHWKH%2-GUDIWHGRSHUDWLQJ E\WKH%2-ZLOOUHTXLUHDOLFHQFHEHIRUHFRPPHQFLQJ guidelines for companies offering remittances services RSHUDWLRQVWRSURYLGHWKHVHUYLFH in Jamaica and held discussions with the industry to REWDLQ WKHLU LQSXW LQ ¿QDOL]LQJ WKHVH JXLGHOLQHV 7KH 7KHOLFHQVLQJSURFHVVHQWDLOVinter aliaWKHDVVHVVPHQW guidelines stipulate the standards against which the RIGLUHFWRUVDQGVLJQL¿FDQWVKDUHKROGHUVRIWKHFRPSDQ\ RSHUDWLRQVRIUHPLWWDQFHFRPSDQLHVZLOOEHPRQLWRUHG DQGWKHPDQDJHURIHDFKORFDWLRQXQGHUWKH%2-¶Vµ)LW The regulatory regime will entail the issuing of licences 3URSHU¶FULWHULD$WHQGSHUVRQVZHUHEHLQJ to all companies approved to offer the service in DVVHVVHG -DPDLFD The regulatory function will be discharged through $VDW2FWREHUDSSOLFDWLRQVIURPFRPSDQLHV onsite inspections of primary agents and in-house SULPDU\DJHQWV 26 that are currently offering the service monitoring through reports submitted electronically to LQ -DPDLFD DV UHSUHVHQWDWLYHV RI RYHUVHDVEDVHG WKH%2- remittance service providers had been received and Chart 17 Geographic Distribution of Remittance Locations as at 31 October 2004 26 3ULPDU\$JHQWVDUHORFDOFRPSDQLHVWKDWFRQGXFWUHPLWWDQFHWUDQVDFWLRQVWKURXJKEUDQFKRI¿FHVDQGVXEDJHQWV External Sector Developments 7. Production and Prices 7.1 Production RI HFRQRPLF JURZWK QRW ZLWKVWDQGLQJ WKH LPSDFW RI a tropical storm and a hurricane on the economy in the he Jamaican economy is estimated to have VHFRQGKDOIRIWKH\HDU7KHPRVWVLJQL¿FDQWLPSHWXVWR JURZQ E\ SHU FHQW LQ UHODWLYH WR D JURZWK HPDQDWHG IURP VHUYLFHV ZKLFK DFFRXQWHG IRU JURZWK RI SHU FHQW LQ see Table T DSSUR[LPDWHO\ SHUFHQWRIWKHJURZWKLQUHDO*'3 56 7KHHVWLPDWHGH[SDQVLRQLQUHDO*URVV'RPHVWLF 3URGXFW *'3 UHSUHVHQWHGWKHVL[WKFRQVHFXWLYH\HDU IRUWKH\HDU Table 56 SECTORAL CONTRIBUTION TO GDP GROWTH (%) Contribution Sectors Jan –Dec 2004 (2004) *22'6 $*5,&8/785()25(675< ),6+,1* 0,1,1* 48$55<,1* 0$18)$&785,1* &216758&7,21 ,167$//$7,21 6(59,&(6 %$6,&6(59,&(6 Electricity & Water 7UDQVSRUW6WRUDJH &RPPXQLFDWLRQ 27+(56(59,&(6 'LVWULEXWLYH7UDGH :KROHVDOH 5HWDLO )LQDQFLQJ ,QVXUDQFH6HUYLFHV 5HDO(VWDWHV %XVLQHVV6HUYLFHV 3URGXFHUVRI*RYHUQPHQW6HUYLFHV 0LVFHOODQHRXV6HUYLFHV +RXVHKROGV 3ULYDWH1RQ3UR¿W,QVWLW ,0387('6(59,&(&+$5*(6 727$/*'3 Annual Report 2004 Source: STATIN Distributive trademiscellaneous servicestransport, Table 57 storage & communication and real estate & business DOMESTIC CROP PRODUCTION Production (‘000 tonnes) servicesZHUHWKHPDLQDUHDVRIJURZWKLQVHUYLFHV$Q Crop Group 2003 2004 % Change expansion in the goods producing sectors during the (VWLPDWHV FRPSLOHG E\ WKH 0LQLVWU\ RI $JULFXOWXUH )RU WKH UHYLHZ \HDU WKH H[SRUW RI EDQDQD FLWUXV DQG LQGLFDWH WKDW IRU GRPHVWLF FURS SURGXFWLRQ FRFRDGHFOLQHGE\ SHUFHQW SHUFHQWDQG GHFOLQHGE\SHUFHQW see Table 57 5HSRUWVIURP SHU FHQW UHVSHFWLYHO\ see Table 58 +XUULFDQH ,YDQ WKH 0LQLVWU\ LQGLFDWH WKDW +XUULFDQH ,YDQ UHVXOWHG LQ destroyed bananas under cultivation for the local and damage to the domestic agriculture sector amounting H[SRUWPDUNHWVDVZHOODVSHUFHQWRIWKHIUXLWVLQ WRELOOLRQ SHUFHQWRI*'3 $SSUR[LPDWHO\ FLWUXV2XWSXWLQWKHFRIIHHLQGXVWU\GLGQRWIDOOLQWKH SHU FHQW RI WKH WRWDO KHFWDUHV XQGHU FXOWLYDWLRQ FXUUHQW\HDUDOWKRXJKWKHKXUULFDQHDIIHFWHGWKHLQGXVWU\ RU KHFWDUHV ZHUH DIIHFWHG E\ WKH KXUULFDQH DVWKHFURS\HDUKDGDOUHDG\EHHQFRPSOHWHGKRZHYHU $JULFXOWXUH ZDV DOVR DIIHFWHG E\ SHULRGLF GU\ VSHOOV it is anticipated that output will be adversely affected in in some parishes during the March 2004 quarter and WKHFURS\HDU LVODQGZLGHGURXJKWFRQGLWLRQVLQWKH-XQHTXDUWHU ,QDGGLWLRQWRZHDWKHUUHODWHGIDFWRUVLQFUHDVHVLQWKH 6XJDU FDQH SURGXFWLRQ JUHZ E\ SHU FHQW GXULQJ FRVWRILQSXWVVXFKDVIHUWLOL]HUVSHVWLFLGHVDQGVRPH DWWULEXWDEOH WR WKH LQLWLDWLYHV E\ WKH 6XJDU SODQWLQJ PDWHULDOV DGYHUVHO\ DIIHFWHG WKH VHFWRU 7KH &RUSRUDWLRQRI-DPDLFD 6&- WRUHMXYHQDWHWKHVHFWRU VFDUFLW\ DQG KLJK FRVW RI IDUP ODERXU DV ZHOO DV WKH 7KHVH LQLWLDWLYHV LQFOXGHG EHWWHU ¿HOG PDQDJHPHQW continued high level of praedial larceny also hampered SUDFWLFHVDQGDGGLWLRQDOKHFWDUHVFXOWLYDWHG,QUHODWLRQ SURGXFWLRQ WRVXJDUH[SRUWDJURZWKRISHUFHQWLQYROXPH The export agricultureVXEVHFWRUGHFOLQHGE\SHU ZDV DVVRFLDWHG ZLWK DQ LQFUHDVH RI SHU FHQW LQ FHQWLQ)RUWKH¿UVWKDOIRIWKH\HDUWKHVXEVHFWRU VXJDU SURGXFWLRQ WKH FRQVHTXHQFH RI LPSURYHPHQWV Production and Prices Bank of Jamaica LQERWKWKHTXDOLW\DQGTXDQWLW\RIVXJDUFDQHPLOOHG7KH LQ $ GHFOLQH RI SHU FHQW ZDV UHFRUGHG IRU WKH improvement in the quality of the crop was evidenced by a VHFRQGKDOIRI7KLVUHGXFHGJURZWKZDVDVVRFLDWHG GHFOLQHLQWKHWRQQHVFDQHWRWRQQHVVXJDU 7&76 UDWLRWR ZLWK WKH LPSDFW RI +XUULFDQH ,YDQ RQ SURGXFWLRQ JLYHQ LQIURPLQ the temporary absence of electricity and potable water at YDULRXVPDQXIDFWXULQJFRPSDQLHV,QDGGLWLRQWKHFORVXUH Table 58 RI WKH 3HWURMDP RLO UH¿QHU\ LQ 2FWREHU UHGXFHG RYHUDOO DFWLYLW\LQWKDWLQGXVWU\IRUWKH\HDU EXPORT CROPS Crop 2003 2004 % Change Exports (‘000tonnes) The expansion in value added in the manufacturing sector Banana stemmed from both the food, beverages & tobacco and Citrus the other manufacturing VXEVHFWRUV:LWKUHJDUGWRfood, Cocoa Coffee beverages & tobacco JURZWK LQ IRRG H[FOXGLQJ VXJDU Pimento alcoholic beverages and tobacco production was partly Production (000’tonnes) 6XJDUFDQH offset by the decline in the production of non-alcoholic Sources: Bank of Jamaica Estimates & Sugar Corporation of EHYHUDJHV7KHLPSURYHPHQWLQIRRGSURFHVVLQJVWHPPHG Jamaica SULPDULO\IURPWKHSRXOWU\PHDWHGLEOHIDWVDQGFRQGHQVHG PLON SURGXFLQJ LQGXVWULHV ZKLFK RIIVHW WKH GHFOLQHV LQ The value added of the mining VHFWRUH[SDQGHGE\SHU DQLPDO IHHGV FRUQPHDO SURGXFWLRQ DQG ÀRXU SURGXFWLRQ FHQWLQDORZHUUDWHWKDQWKHDYHUDJHJURZWKRISHU (see Table 59 ,QFUHDVHGH[SRUWGHPDQGSDUWO\LQÀXHQFHG FHQWUHFRUGHGEHWZHHQDQG)RUWKH\HDUDOXPLQD E\HQKDQFHGSURPRWLRQDODFWLYLWLHVZDVPDLQO\UHVSRQVLEOH SURGXFWLRQJUHZE\SHUFHQW7KLVJURZWKZDVGXHWR IRUWKHJURZWKLQDOFRKROLFEHYHUDJHVSURGXFWLRQ WKH DGGLWLRQ RI UH¿QLQJ FDSDFLW\ DW WKUHH DOXPLQD SODQWV GXULQJWKH\HDU+RZHYHUWKHUHZDVDGHFOLQHLQFDSDFLW\ Growth in other manufacturing was attributed to the XWLOLVDWLRQWRDSSUR[LPDWHO\ SHUFHQWIURP SHUFHQW performance of the non-metallic mineral and chemical LQDWWULEXWHGLQSDUWWR+XUULFDQH,YDQ&UXGHEDX[LWH SURGXFLQJVXEVHFWRUV7KHSHUIRUPDQFHRIWKHQRQPHWDOOLF SURGXFWLRQGHFOLQHGE\SHUFHQWLQWKLVUHÀHFWHG PLQHUDOLQGXVWU\UHÀHFWHGDSHUFHQWLQFUHDVHLQFHPHQW DGHFOLQHLQFDSDFLW\XWLOLVDWLRQWRSHUFHQWIURP SURGXFWLRQ LQ VWHPPLQJ IURP UHGXFHG FRPSHWLWLRQ SHUFHQWLQ'DPDJHVXVWDLQHGWRWKHORDGLQJJDQWU\DW IURPLPSRUWVDVZHOODVJURZWKLQWKHGRPHVWLFFRQVWUXFWLRQ WKH6W$QQ%DX[LWH&RPSDQ\VLJQL¿FDQWO\DIIHFWHGRXWSXW VHFWRU7KHSURGXFWLRQRIFKHPLFDOSURGXFWVJUHZE\ SHU LQWKHUHYLHZ\HDU FHQWLQGULYHQSULPDULO\E\DQLQFUHDVHRISHU FHQWLQWKHPDQXIDFWXUHRIGHWHUJHQWV For manufacturing WKH VHFWRU UHFRUGHG JURZWK RI SHUFHQWLQWKH¿UVWQRWDEOHLQFUHDVHVLQFH7KH Economic activity in construction & installation increased VHFWRU JUHZ E\ SHU FHQW IRU WKH ¿UVW KDOI RI WKH \HDU E\SHUFHQWLQUHSUHVHQWLQJ¿YHFRQVHFXWLYH\HDUV SDUWO\ UHÀHFWLQJ WKH QRUPDOLVDWLRQ RI SURGXFWLRQ LQ WKH RIH[SDQVLRQ VXJDU PRODVVHV UXP DQG SHWUROHXP UH¿QLQJ LQGXVWULHV following reduced output levels over the same period Production and Prices Annual Report 2004 Table 59 For electricity & water RXWSXW GHFOLQHG PDUJLQDOO\ E\ Items Production (‘000tonnes) SHUFHQWLQWKHUHYLHZ\HDU7KHVHFWRUUHFRUGHGJURZWK 2003 2004 % Change RISHUFHQWLQWKH¿UVWKDOIRIWKH\HDULQFRQWUDVWWR Poultry Meat (GLEOH2LOV WKHGHFOLQHRISHUFHQWUHDOLVHGLQWKHVHFRQGKDOI7KH Cornmeal performance of the sector in the latter half was attributed to Condensed Milk Flour WKHGLVUXSWLRQLQHOHFWULFLW\JHQHUDWLRQFDXVHGE\+XUULFDQH $QLPDO)HHGV ,YDQ)RUWKHUHYLHZ\HDUWKHUHZDVPDUJLQDOJURZWKRI 6XJDU per cent in total electricity generation while sales declined Source: Planning Institute of Jamaica E\SHUFHQW(OHFWULFLW\VDOHVFDWHJRUL]HGDV³LQGXVWULDO´ 7KH LQGXVWU\ JUHZ FRQVLVWHQWO\ WKURXJKRXW WKH \HDU DQG ³RWKHU´ GHFOLQHG E\ SHU FHQW DQG SHU FHQW UHJLVWHULQJ WKH VWURQJHVW JURZWK RI SHU FHQW LQ WKH UHVSHFWLYHO\:DWHUSURGXFWLRQLQDOVRIHOOE\SHU 'HFHPEHU TXDUWHU *URZWK HPDQDWHG SULPDULO\ IURP RQ FHQW UHODWLYH WR D JURZWK RI SHU FHQW LQ WKH SUHYLRXV JRLQJ URDG ZRUNV KRWHO FRQVWUXFWLRQ DV ZHOO DV WKH SRVW \HDU KXUULFDQH UHFRQVWUXFWLRQ DFWLYLW\ 7KH H[SDQVLRQ LQ URDG ZRUNV UHÀHFWHG WKH FRPSOHWLRQ RI WKH %XVK\ 3DUN WR The transport, storage & communication sector recorded 0DQGHODVHJPHQWRI3KDVH$RIWKH+LJKZD\SURMHFW DPDUJLQDOJURZWKRI SHUFHQWLQWKHUHYLHZ\HDU7KLV DVZHOODVZRUNRQWKH3RUWPRUHVHJPHQW,QDGGLWLRQWKHUH PDUJLQDOJURZWKLVUHODWLYHWRWKHDYHUDJHJURZWKRISHU ZDVFRQWLQXHGZRUNRQWKH1RUWK&RDVW+LJKZD\SURMHFW FHQWUHFRUGHGRYHUWKHSUHYLRXV¿YH\HDUV:LWKUHJDUGWR These activities were complemented by public sector the communicationVXEVHFWRUWKHWRWDOQXPEHURIWHOHSKRQH FDSLWDOSURMHFWVVXFKDVWKHH[SDQVLRQRIWKHSRUWIDFLOLWLHV ³OLQHV´ LQ VHUYLFH PRELOH DQG µSODLQ ROG WHOHSKRQHV¶ LQ .LQJVWRQ ,QFUHDVHG FRQVWUXFWLRQ DFWLYLW\ LQ UHVLGHQWLDO 3276 ZDVHVWLPDWHGWRKDYHH[SDQGHGE\DSSUR[LPDWHO\ KRXVLQJDOVRFRQWULEXWHGWRJURZWKLQWKHVHFWRU)RUH[DPSOH SHUFHQWIRUWKHUHYLHZ\HDU7KHPDUJLQDOJURZWKLQ KRXVLQJFRPSOHWLRQVE\WKH1DWLRQDO+RXVLQJ7UXVW 1+7 the transport VXEVHFWRU ZDV UHODWHG LQ SDUW WR GHFOLQHV WKHPDMRUSURYLGHURIUHVLGHQWLDOKRXVHVLQ-DPDLFDJUHZE\ RISHUFHQWSHUFHQWDQGSHUFHQWLQDLUFDUJR DQHVWLPDWHG SHUFHQWLQ&HPHQWVDOHVDQRWKHU domestic cargo movements and the number of ships calling LQGLFDWRU IRU FRQVWUXFWLRQ DFWLYLW\ LQFUHDVHG E\ SHU DW -DPDLFDQ SRUWV UHVSHFWLYHO\ 7KHVH FRQWUDFWLRQV ZHUH FHQWGXULQJWKH\HDU DWWULEXWHGSULPDULO\WRWKHSDVVDJHRI+XUULFDQH,YDQ :LWK UHVSHFW WR VHUYLFHV DOO WKH VXEVHFWRUV ZLWK WKH $ FRQWUDFWLRQ RI SHU FHQW LQ WKH UHDO YDOXH DGGHG RI exception of electricity & water DQG ¿QDQFLQJ ¿QDQFLQJ LQVXUDQFHservices GXULQJWKH\HDUUHÀHFWHG insurance LPSURYHG LQ 7KH distributive trade the performance of the banking institutions VXEVHFWRU VHFWRU JUHZ E\ SHU FHQW IRU WKH \HDU DQG JLYHQ LWV Commercial banks’ interest income declined in real terms ZHLJKW LQ *'3ZDV WKH IRXUWK ODUJHVW FRQWULEXWRU WR WKH E\ SHUFHQW7KLVGHFOLQHZDVLQÀXHQFHGSULPDULO\E\ RYHUDOO HFRQRPLF H[SDQVLRQ 7KH UHFRQVWUXFWLRQ SURFHVV DUHGXFWLRQLQLQYHVWPHQWHDUQLQJVZKLFKRXWZHLJKHGWKH LQ WKH DIWHUPDWK RI +XUULFDQH ,YDQ IXHOOHG PXFK RI WKH JURZWKRQLQWHUHVWHDUQHGIURPORDQVDQGDGYDQFHV'XULQJ DFWLYLW\LQGLVWULEXWLYHWUDGH*URZWKZDVDOVRLQGLFDWHGE\ FRPPHUFLDO EDQNV¶ VWRFN RI LQYHVWPHQWV GHFOLQHG DQHVWLPDWHGUHDOLQFUHDVHRISHUFHQWLQPHUFKDQGLVH LQUHDOWHUPVE\SHUFHQWZKLOHDYHUDJH7UHDVXU\ELOOV LPSRUWVLQ Production and Prices Bank of Jamaica rates and commercial bank weighted average deposit WKHUHDOGHSUHFLDWLRQRIWKH-DPDLFD'ROODUYLVjYLVWKH UDWHV IHOO E\ DSSUR[LPDWHO\ DQG EDVLV SRLQWV FXUUHQFLHVRI-DPDLFD¶VPDLQWUDGLQJSDUWQHUVDWWULEXWHG UHVSHFWLYHO\1RQLQWHUHVWLQFRPHGHFOLQHGE\SHU WRWKHGHSUHFLDWLRQRIWKH86GROODUYLVjYLVWKH(XUR cent due to the decline in foreign exchange gains during DQGWKH3RXQG6WHUOLQJFRXOGKDYHHQJHQGHUHGJURZWK WKH\HDUZKLFKRIIVHWLQFUHDVHVLQLQFRPHHDUQHGIURP LQWKHVHFWRU VHUYLFHFKDUJHVIHHVDQGFRPPLVVLRQV 7KH VLJQL¿FDQW VORZ GRZQ LQ VWRS RYHU DUULYDOV ZDV GXHWRWKHSDVVDJHRIWKHKXUULFDQH$IHZKRWHOVZHUH 'ULYHQE\WKHSHUIRUPDQFHLQWRXULVPYDOXHDGGHGLQ forced to close after the hurricane and were reopened miscellaneous VHUYLFHV H[SDQGHG E\ SHU FHQW LQ DIWHU PLG 1RYHPEHU 7KH FUXLVH LQGXVWU\ ZDV DOVR 7KHPDMRUIDFWRUFRQWULEXWLQJWRWKHSHUIRUPDQFH DIIHFWHG E\ WKH KXUULFDQHV ZKLFK IRUFHG RSHUDWRUV WR RIWKHWRXULVPLQGXVWU\ZDVDQLQFUHDVHRISHUFHQW reorganize their itineraries and in some cases cancel LQWRWDOVWRSRYHUDUULYDOVOHGE\DQH[SDQVLRQRISHU FUXLVHV-DPDLFDEHQH¿WHGIURPWKHGLYHUVLRQRIVKLSV FHQWLQIRUHLJQQDWLRQDODUULYDOV2QWKHRWKHUKDQGWKHUH IURP WKH &D\PDQ ,VODQGV LQ SDUWLFXODU EXW WKH ORFDO ZDVDUHGXFWLRQRI SHUFHQWLQFUXLVHVKLSDUULYDOV ports also suffered loss of business as some of the $JDLQVWWKLVEDFNJURXQGYLVLWRUH[SHQGLWXUHLQFUHDVHG FUXLVHURXWHVWKDWLQFOXGHG-DPDLFDKDGWREHFDQFHOOHG see Balance of Payments E\ SHU FHQW LQ EHFDXVHRIGDPDJHWRRWKHUSRUWVRQWKHURXWH6RPH 2I QRWH WRWDO VWRS RYHU DQG FUXLVH SDVVHQJHU DUULYDOV WHQVKLSFDOOVZHUHORVWEHFDXVHRIWKH+XUULFDQHDQG H[SDQGHGE\ SHUFHQWDQGSHUFHQWUHVSHFWLYHO\ WKH7RSLFDO6WRUPEXW¿YHDGGLWLRQDOFDOOVZHUHJDLQHG IRU WKH ¿UVW KDOI RI WKH \HDU )RU WKH ODWWHU KDOI WRWDO because of damage to other destinaWLRQV VWRSRYHUDUULYDOVJUHZE\DPDUJLQDOSHUFHQWZKLOH WKHUHZDVDGHFOLQHRI SHUFHQWLQFUXLVHSDVVHQJHU Outlook DUULYDOV The Jamaican economy is projected to grow within WKHUDQJHRISHUFHQWWRSHUFHQWIRU7KLV The growth in stop over visitor arrivals for the year projection is predicated on positive expectations for the was associated with continued marketing efforts of the JRRGVSURGXFLQJVHFWRUVDVZHOODVVHUYLFHV7KHPRVW notable growth is expected in construction mining -DPDLFD7RXULVW%RDUG -7% DQGWKHDGGLWLRQRIQHZ distributive trade and electricity and water DLUOLIWFDSDFLW\WRWKH,VODQGLQFOXGLQJQHZDLUURXWHV E\&RQWLQHQWDODQG86$LUZD\V,QWKLVFRQWH[WWKHUH The maintenance of a stable macro environment should ZHUHVWURQJH[SDQVLRQVRISHUFHQW SHUFHQW VXSSRUW WKH FRQWLQXHG H[SDQVLRQ LQ WKH HFRQRP\ DQG SHU FHQW LQ DUULYDOV IURP WKH (XURSHDQ 8. The external environment is also expected to remain DQG&DQDGLDQPDUNHWVUHVSHFWLYHO\7KHVKDUHRIWRWDO IDYRXUDEOHDVZRUOGHFRQRPLFJURZWKFRQWLQXHVDOEHLW arrivals attributed to visitors from Europe increased to DWDUHGXFHGSDFHZKLOHORZLQÀDWLRQLVH[SHFWHGWREH SHUFHQWLQIURPSHUFHQWLQWKLV PDLQWDLQHG DPRQJ -DPDLFD¶V PDMRU WUDGLQJ SDUWQHUV positively affected the average length of stay and the +RZHYHUDGYHUVHGHYHORSPHQWVLQWKHLQWHUQDWLRQDORLO DYHUDJH H[SHQGLWXUH SHU SHUVRQ WR WKH ,VODQG IRU WKH market could have an impact on growth in the Jamaican \HDU)XUWKHUXQXVXDOO\FROGZHDWKHULQWKH86$DQG HFRQRP\ Production and Prices Annual Report 2004 7.2. Prices LQ 2FWREHU :LWK WKH SUXGHQW PDQDJHPHQW RI EDVH PRQH\ DQG VWDELOLW\ LQ WKH IRUHLJQ H[FKDQJH PDUNHW 7.2.1. Overview there was a moderation in this trend towards the end The macroeconomic variables performed fairly well RI WKH \HDU +RZHYHU LQ WKH ODWWHU KDOI RI WKH \HDU in 2004 and provided a stable background for price WKH GLVUXSWLRQ LQ GRPHVWLF SURGXFWLRQ SDUWLFXODUO\ LQ PRYHPHQWV ,Q SDUWLFXODU WKHUH ZDV UHODWLYH VWDELOLW\ DJULFXOWXUHEURXJKWRQE\WKHSDVVDJHRIWKH+XUULFDQH led to a deterioration in the supply of consumer goods LQ WKH IRUHLJQ H[FKDQJH PDUNHW D IDYRXUDEOH ¿VFDO environment and the prudent demand management DQG VHUYLFHV $GGLWLRQDOO\ LQFUHDVHV LQ LQWHUQDWLRQDO SXUVXHG E\ WKH &HQWUDO %DQN7KH GDPSHQLQJ LPSDFW RLO SULFHV KDG DQ DGYHUVH HIIHFW RQ FRQVXPHU SULFHV RI WKHVH IDFWRUV RQ LQÀDWLRQ KRZHYHU ZDV SDUWLDOO\ countered by increases in international oil prices and the LPSDFW RI +XUULFDQH ,YDQ SDUWLFXODUO\ RQ DJULFXOWXUDO VXSSOLHV 7KH UDWH RI LQÀDWLRQ GXULQJ ZDV SHU FHQW FRPSDUHG WR WKH SHU FHQW LQ see Chart 18 7KHRXWWXUQIRUWKH\HDUZDVPDLQO\LQÀXHQFHGE\ LQÀDWLRQLQWKH'HFHPEHUTXDUWHUDVSULRUWRWKHSDVVDJH RI+XUULFDQH,YDQLQÀDWLRQIRUWKH\HDUWR6HSWHPEHU ZDV SHUFHQW7KHTXDUWHUO\LQÀDWLRQUDWHVLQ ZHUH SHU FHQW IRU HDFK RI WKH 0DUFK DQG -XQH 7KHVWDELOLW\LQWKH-DPDLFD'ROODUKRZHYHUKHOSHGWR TXDUWHUV SHUFHQWDQGSHUFHQWIRUWKH6HSWHPEHU PRGHUDWHWKHVHLQÀDWLRQDU\LPSXOVHV DQG'HFHPEHUTXDUWHUVUHVSHFWLYHO\ The prudent demand management pursued by the &HQWUDO%DQNKHOSHGWRPRGHUDWHLQÀDWLRQUDWHGXULQJ %DVH PRQH\ PDQDJHPHQW IRU WKH ¿UVW QLQH PRQWKV RI WKH \HDU ZDV ZLWKLQ SURJUDPPHG WDUJHW ZKLFK KDG D SRVLWLYH HIIHFW RQ FRUH LQÀDWLRQ)RU WKH \HDUFRUHLQÀDWLRQZDVSHUFHQWGRZQIURPSHU cent in 2003 (see Chart 19 0RQWKO\ PRYHPHQWV LQ FRUH LQÀDWLRQ UHPDLQHG IDLUO\ VWDEOH LQ WKH ¿UVW WKUHH TXDUWHUVRIWKH\HDU+RZHYHUWKHDGYHUVHVKRFNRIWKH +XUULFDQHOHGWRDQRWLFHDEOHLQFUHDVHLQFRUHLQÀDWLRQ Production and Prices Bank of Jamaica some restrictions on the fee structure of the telephone company thus enabling them to charge the economic FRVWRIWKHLUODQGOLQHVHUYLFH7KHLQFUHDVHLQWKHFRVW of electricity stemmed from an annual adjustment in FXVWRPHUFKDUJHDQGHQHUJ\WDULIIVDVZHOODVPRYHPHQWV LQIXHOFKDUJHV7KH\HDUO\DGMXVWPHQWLQHQHUJ\WDULIIV DSSURYHGE\WKH285GXULQJWKH\HDUZDVLQWHQGHGWR UHFRYHUPDLQWHQDQFHFRVWRIWKHHOHFWULFLW\SODQW Supply Shock )DFWRUV$IIHFWLQJ,QÀDWLRQ $JULFXOWXUDOSURGXFWLRQH[SHULHQFHGWKHXVXDOVHDVRQDO 7KH LQÀDWLRQ RXWWXUQ IRU ZDV LQÀXHQFHG E\ decline in the summer months and damages due to H[FHSWLRQDO GRPHVWLF DQG LQWHUQDWLRQDO IDFWRUV 7KH 7URSLFDO 6WRUP &KDUOLH LQ $XJXVW ZKLFK KDG WKH primary domestic factors include administered price H[SHFWHGDGYHUVHHIIHFWRQSULFHVIRUWKHVHFRPPRGLWLHV DGMXVWPHQWVDQGDJULFXOWXUDOVXSSO\VKRUWDJHV7KHPDLQ +RZHYHUWKHVKRUWDJHLQDJULFXOWXUDOVXSSO\ZDVIXUWKHU LQWHUQDWLRQDO IDFWRU UHODWHV WR WKH VLJQL¿FDQW LQFUHDVH H[DFHUEDWHGLQWKH'HFHPEHUTXDUWHUDVDUHVXOWRIWKH LQ FUXGH RLO SULFHV +RZHYHU LPSXOVHV WR LQÀDWLRQ QHJDWLYH LPSDFW RI +XUULFDQH ,YDQ$ FRPSDULVRQ RI were moderated by the Bank’s demand management SULFHLQFUHDVHVJLYHQVLPLODUVKRFNVUHYHDOHGWKDWWKH SROLFLHV LPSDFWRI+XUULFDQH,YDQRQSULFHVLQJHQHUDOZDVPRUH VHYHUHWKDQ+XUULFDQH*LOEHUWLQ see Table 60 Domestic Shocks 7KLV RFFXUUHG LQ D FRQWH[W ZKHUH LQ WKHUH ZHUH SULFHFRQWUROSROLFLHVLQSODFH $GPLQLVWHUHG SULFH DGMXVWPHQWV ZHUH UHODWHG WR LQFUHDVHVLQSRVWDJHDQGXWLOLW\UDWHV'XULQJWKH\HDU 'HVSLWH VLJQL¿FDQW UHGXFWLRQ LQ WKH LPSRUW GXW\ RQ WKHFRVWRILQODQGSRVWDJHGRXEOHGZKLOHSRVWDJHWRWKH YHJHWDEOHV WKHUH ZHUH LQVWDQFHV RI VLJQL¿FDQW SULFH 8QLWHG6WDWHVDQGWKH8QLWHG.LQJGRPURVHE\SHU LQFUHDVHVRQVRPHRIWKHVHFRPPRGLWLHV7KLVRFFXUUHG FHQW DQG SHU FHQW UHVSHFWLYHO\ 7KH DGMXVWPHQW in a context where the pass through of the savings from was advanced as an attempt by the postal authorities to WKHLPSRUWUHGXFWLRQZDVQRWSDVVHGRQWRWKHFRQVXPHU LQFUHDVHSUR¿WDELOLW\DQGVWHPWKHXVHRI-DPDLFDDVD LQOLJKWRIWKHVKRUWDJH EXONGLVWULEXWLRQSRLQWE\VRPH86FRPSDQLHV External Shocks The increase in the utility rates during the year emanated from both administered adjustments as well as external The impact of international price movements of IDFWRUV 7KH PDMRU SURYLGHU RI ¿[HGOLQH WHOHSKRQHV SHWUROHXPSURGXFWVZDVVLJQL¿FDQWRQGRPHVWLFSULFHV LQFUHDVHG UHQWDO UDWHV E\ SHU FHQW LQ 0DUFK LQ 7KH SULFH RI WKH EHQFKPDUN :HVW 7H[DV 7KLV ZDV LQ D FRQWH[W ZKHUH WKH 2I¿FH RI 8WLOLWLHV ,QWHUPHGLDWH :7, FUXGH RLO URVH E\ SHU FHQW 5HJXODWLRQ 285 WKHXWLOLW\VXSHUYLVRU\ERG\OLIWHG LQUHODWLYHWRLQFUHDVHVRI SHUFHQWDQG Production and Prices 100 Annual Report 2004 Table 60 7KH,PSDFWRI:HDWKHU5HODWHG6KRFNVRQ,QÀDWLRQ Starchy Foods Veg. & Fruits ,QÀDWLRQ0WKO\ Mthly(Qrtly) Mthly(Qrtly) Chge* (Qrtly) *LOEHUW May 2002 Floods 1RYHPEHU5DLQV ,YDQ Month immediately after impact SHUFHQWLQDQGUHVSHFWLYHO\7KHDYHUDJH prices (see Chart 21a 7KHVHLQFUHDVHVZHUHLQÀXHQFHG SULFHRIFUXGHRLOLQZDVDSSUR[LPDWHO\86 E\ KHLJKWHQHG ZRUOG GHPDQG FRXSOHG ZLWK UHGXFHG SHUEDUUHOUHODWLYHWR86SHUEDUUHOLQ see RXWSXWLQWKHPDMRUSURGXFLQJDUHDV7KHDQQXDODYHUDJH Chart 20 +RZHYHUFUXGHRLOSULFHURVHWRDVKLJKDV increase in the prices of coconut oil and soybean oil in 86SHUEDUUHOLQUHODWLYHWRDKLJKRI86 ZDVSHUFHQWDQGSHUFHQWUHVSHFWLYHO\ LQ7KHLQFUHDVHLQWKHSULFHRIFUXGHRLOKDGD (see Table 61 7KLVFRPSDUHGWRSULFHLQFUHDVHVRI noticeable effect on the prices of domestic household DQGDXWRPRWLYHIXHOVDVZHOODVXWLOLW\UDWHV The increase in fuel charges for electricity was primarily DWWULEXWHGWRWKHVWURQJPRYHPHQWVLQZRUOGRLOSULFHV )RUWKH\HDUIXHOFKDUJHVLQFUHDVHGE\DSSUR[LPDWHO\ SHU FHQW UHODWLYH WR SHU FHQW LQ $GGLWLRQDOO\RWKHURLOUHODWHGSURGXFWVVXFKDVNHURVHQH DQGFRRNLQJJDVH[SHULHQFHGDYHUDJHLQFUHDVHVRI SHU FHQW DQG SHU FHQW UHVSHFWLYHO\ ,QFUHDVHV LQ the price of crude oil typically lead to second round SHUFHQWDQG SHUFHQWUHVSHFWLYHO\LQ adjustments in the prices of domestically produced JRRGVDQGVHUYLFHV+RZHYHUWKHUHLVJHQHUDOO\ULJLGLW\ ,QFUHDVHV LQ LQWHUQDWLRQDO JUDLQ SULFHV DOVR KDG DQ in downward adjustments with declines in international DGYHUVH LPSDFW RQ GRPHVWLF SULFHV ,Q SDUWLFXODU ULFH SULFHV SULFHVLQLQFUHDVHGRQDYHUDJHE\SHUFHQW relative to 2003 (see Table 61 7KH PRYHPHQW LQ The rise in the prices of vegetable oils on the world WKH SULFH RI ULFH SULPDULO\ UHÀHFWHG WKH FRQFXUUHQFH market also had an unfavourable effect on domestic RIKLJKHUGHPDQGIRUWKH7KDLSURGXFWZLWKWKH7KDL Production and Prices 101 Bank of Jamaica government’s decision to temporarily suspend sales of the commodity to WKH LQWHUQDWLRQDO PDUNHW GXULQJ WKH\HDU &RUH,QÀDWLRQ &RUHLQÀDWLRQVORZHGWRSHUFHQWLQIURP SHUFHQWLQ)RUWKH¿UVWQLQHPRQWKVRIWKH\HDU FRUH LQÀDWLRQ ZDV UHODWLYHO\ VWDEOH DQG FRQVLVWHQWO\ below the rate that obtained in the previous year (see Chart 22 7KLV VWDELOLW\ ZDV FRQVLVWHQW ZLWK WKH PDQDJHPHQWRIEDVHPRQH\ZLWKLQSURJUDPPHGWDUJHW E\ WKH &HQWUDO %DQN +RZHYHU FRUH LQÀDWLRQ ZDV SDUWLFXODUO\KLJKLQ2FWREHULQWKHFRQWH[WRILQFUHDVHG H[SHQGLWXUH DVVRFLDWHG ZLWK WKH +XUULFDQH *LYHQ WKH SHUYDVLYHQHVVRIWKHVKRFNWRWKH&3,VRPHRIWKHVH impulses could not be eliminated from the measurement RIFRUHLQÀDWLRQ Table 61 International Prices of Selected Commodities Annual Averages (US$) Commodity Units 2003 2004 Annual Average (%) Vegetable Oils &RFRQXW2LO PW Groundnut oil PW 6R\EHDQ2LO PW Grains 6R\EHDQPHDO PW 6R\EHDQ PW Maize PW 6RUJKXP PW Wheat Canada PW 5LFH $ PW Raw Materials &RWWRQµ$¶ NJ 5XEEHU86 NJ )HUWLOL]HU763 PW Zinc NJ 27 measured by the Trimmed mean Production and Prices 102 Annual Report 2004 Table 62 DECOMPOSITION OF INFLATION OUTTURN: CALENDAR YEAR 2004 INFLATION (%) CONTRIBUTION (%) NON- CORE 8.5 62.1 Food & Drink 5.0 36.5 6WDUFK\)RRGV 9HJHWDEOHV )UXLWV 0HDW3RXOWU\ )LVK Fuels/Other Housing Expenses 1.2 8.4 Housing /Other Housing Expenses 1.1 8.1 Other 1.2 9.1 CORE 5.2 37.9 TOTAL 13.7 100.0 &RQWULEXWLRQWR,QÀDWLRQ 7KH PDLQ VXELQGLFHV WKDW FRQWULEXWHG WR LQÀDWLRQ LQ RUDQJHVMeat Poultry & Fish prices were affected by ZHUHFood & DrinkFuels & Other Household WKHPRYHPHQWLQLQWHUQDWLRQDOJUDLQSULFHVDVZHOODV SuppliesHousing & Other Housing Expenses as well WKH +XUULFDQH ,QFUHDVHV LQ LQWHUQDWLRQDO JUDLQ SULFHV as Miscellaneous Expenses (see Table 63 :LWKLQFood DIIHFWHGLPSRUWDQWHOHPHQWVRIGRPHVWLFDQLPDOIHHGV & DrinkWKHPRYHPHQWLQStarchy Foods was mainly ZKLFKE\H[WHQVLRQOHGWRLQFUHDVHVLQWKHFRVWRIPHDW GXHWRLQFUHDVHVLQWKHSULFHVRIWXEHUVVXFKDV\DPV $GGLWLRQDOO\SRXOWU\DQG¿VKSULFHVLQSDUWLFXODUZHUH SRWDWRHVGDVKHHQDQGJUHHQEDQDQDV:LWKUHVSHFWWR VLJQL¿FDQWO\ DIIHFWHG E\ WKH +XUULFDQH DV WKHUH ZDV Vegetables & Fruits the main price increases related to H[WHQVLYH GDPDJH WR ¿VK SRQGV ¿VKLQJ YHVVHOV DQG WRPDWRHV FDEEDJHV HVFDOOLRQ FDUURWV SXPSNLQV DQG HTXLSPHQWDVZHOODVWRFKLFNHQIDUPV Production and Prices 103 Bank of Jamaica Table 63 -DPDLFD&RPSRQHQW&RQWULEXWLRQWR,QÀDWLRQYV Contribution to Group 3ULFH,QÀDWLRQ Groups and Sub-groups ,QÀDWLRQ Weights 2003 2004 2003 2004 FOOD & DRINK 11.2 16.2 47.8 63.9 0HDOV$ZD\)URP+RPH - Meat Poultry & Fish 'DLU\3URGXFWV2LOV )DWV %DNHG3URGXFWV&HUHDOV %UHDNIDVW'ULQN 6WDUFK\)RRGV 9HJHWDEOHV )UXLWV 2WKHU)RRG %HYHUDJHV FUELS & OTHER HOUSEHOLD SUPPLIES 20.7 19.5 9.4 10.5 - +RXVHKROG6XSSOLHV - Fuels HOUSING & OTHER HOUSING EXPENSES 16.7 17.2 9.4 10.1 5HQWDO 2WKHU+RXVLQJ([SHQVHV HOUSEHOLD FURNISHINGS & FURNITURE 8.5 10.0 1.7 2.1 - Furniture - Furnishings HEALTHCARE & PERSONAL EXPENSES 11.5 8.2 5.8 4.3 PERSONAL CLOTHING FOOTWEAR & ACC. 6.0 4.0 2.1 1.5 - Clothing Materials 5HDG\PDGH&ORWKLQJ $FFHVVRULHV - Footwear 0DNLQJ 5HSDLUV TRANSPORTATION 28.6 3.9 15.3 1.9 MISCELLANEOUS EXPENSES 18.5 9.8 10.5 5.8 ALL GROUPS 14.1 13.7 100.0 100.0 Production and Prices 104 Annual Report 2004 Prices for Fuels & Other Household Supplies were LQ WKH $OO -DPDLFD LQGH[ 7KH VWURQJHU LQÀDWLRQDU\ SULPDULO\ LQÀXHQFHG E\ LQFUHDVHV LQ LQWHUQDWLRQDO impulses in the rural areas were as a result of a greater RLO SULFHV DV ZHOO DV WKH LPSDFW RI DGYHUVH ZHDWKHU LPSDFWRIWKH+XUULFDQHRQWKHVHDUHDV FRQGLWLRQV 7KLV JURXS FRQWULEXWHG SHU FHQW WR LQÀDWLRQ Fuels ZKLFK LQFUHDVHG E\ SHU FHQW SULPDULO\UHÀHFWHGLQFUHDVHGSULFHVRIFRRNLQJJDVDQG NHURVHQH Household Supplies LQFUHDVHG E\ SHU FHQWDQGZDVPDLQO\UHÀHFWHGLQFRQVXPHULWHPVVXFK DVSRZGHUHGVRDSFDQGOHVDQGEDWWHULHVDPRQJRWKHUV ,QFUHDVHV LQ XWLOLW\ UDWHV ZHUH DQ LPSRUWDQW IDFWRU LQ Housing & Other Housing Expenses7KHVHHPDQDWHG from both domestic administered adjustments as well The disparity across regions was mirrored in three of DVH[WHUQDOIDFWRUV$GPLQLVWHUHGSULFHFKDQJHVZHUH WKHHLJKWJURXSVZLWKWKHPRVWVLJQL¿FDQWGLYHUJHQFHLQ UHODWHGWRLQFUHDVHGHOHFWULFLW\DQGWHOHSKRQHFKDUJHV Food & Drink (see Table 64 . 7KLVFDWHJRU\UHÀHFWHG The adverse movements in international oil prices UHVSHFWLYHLQFUHDVHVRISHUFHQW SHUFHQWDQG DIIHFWHGWKHIXHOFKDUJHVLQHOHFWULFLW\$GGLWLRQDOO\WKH SHUFHQWLQRural AreasOther Towns and KMA LQFUHDVHGFRVWRIHOHFWULFLW\ZDVLQÀXHQFHGE\DQDQQXDO There was also disparity in Fuels & Other Household DGMXVWPHQWLQWKHHQHUJ\WDULIIZKLFKZDVLQWHQGHGWR Supplies and Healthcare & Personal Expenses )RU UHFRYHU WKH PDLQWHQDQFH FRVW RI WKH HOHFWULFLW\ SODQW Fuels & Other Household Supplies SULFH LQFUHDVHV )RUWHOHSKRQHFKDUJHVWKHUHZDVDVLJQL¿FDQWLQFUHDVH were weakest in the KMASULPDULO\UHÀHFWLQJORZHU LQUHQWDOUDWHVIRUODQGOLQHVHUYLFH LQFUHDVHV LQ WKH SULFH RI NHURVHQH 3ULFH LQFUHDVHV LQ Healthcare & Personal Expenses in Rural Areas and The impact of Miscellaneous Expenses RQ LQÀDWLRQ Other Towns were almost twice that for the KMA7KH PDLQO\ UHÀHFWHG DGMXVWPHQWV LQ SRVWDO UDWHV KLJKHU greater increase in the Rural Areas and Other Towns SUHSDUDWRU\ VFKRRO IHHV VFKRRO UHODWHG H[SHQVHV DQG was caused in part by increases in optician and doctor KLJKHUDGPLVVLRQVIHHVWRFLQHPDV IHHV$QRWKHUGLVSDULW\RIQRWHRFFXUUHGLQHousehold 5HJLRQDO,QÀDWLRQ Furnishings & Furniture ZKHUH KMA experienced VLJQL¿FDQWO\VWURQJHULPSXOVHVWKDQWKHRWKHUUHJLRQV )RUWKHFDOHQGDU\HDURural Areas and Other Towns UHVXOWLQJ IURP D VLJQL¿FDQW LQFUHDVH LQ WKH SULFHV RI H[SHULHQFHGVLPLODUUDWHVRILQÀDWLRQZKLOHWKHUDWHZDV IXUQLWXUH lower in the Kingston Metropolitan Area (KMA 7KH UHVSHFWLYHRXWWXUQVZHUHSHUFHQWSHUFHQWDQG SHUFHQW see Chart 23 2IQRWHLQÀDWLRQLQRural Areas and Other Towns exceeded the overall increase Production and Prices Bank of Jamaica Table 64 REGIONAL INFLATION Weight in Groups / Sub-groups KMA (%) Other CPI Towns (%) 5XUDO FOOD & DRINK 0.5563 13.4 17.9 18.4 0HDOV$ZD\)URP+RPH 0.0741 - Meat Poultry & Fish 0.1613 'DLU\3URGXFWV2LOV )DWV 0.0668 %DNHG3URGXFWV&HUHDOV %UHDNIDVW'ULQN 0.0864 6WDUFK\)RRGV 0.0525 9HJHWDEOHV )UXLWV 0.0650 2WKHU)RRG %HYHUDJHV 0.0502 FUELS & OTHER HOUSEHOLD SUPPLIES 0.0735 18.5 22.5 19.2 +RXVHKROG6XSSOLHV 0.0482 - Fuels 0.0253 HOUSING & OTHER HOUSING EXPENSES 0.0786 17.0 18.2 16.9 5HQWDO 0.0209 2WKHU+RXVLQJ([SHQVHV 0.0577 HOUSEHOLD FURNISHINGS & FURNITURE 0.0283 14.7 4.5 9.2 - Furniture 0.0068 - Furnishings 0.0215 HEALTHCARE & PERSONAL EXPENSES 0.0697 5.7 10.9 11.1 PERSONAL CLOTHING FOOTWEAR & ACC. 0.0507 3.2 5.6 4.1 - Clothing Materials 0.0055 5HDG\PDGH&ORWKLQJ $FFHVVRULHV 0.0242 - Footwear 0.0159 0DNLQJ 5HSDLUV 0.0051 TRANSPORTATION 0.0644 3.6 5.7 3.0 MISCELLANEOUS EXPENSES 0.0785 9.8 10.5 9.2 ALL GROUPS 1.0000 12.0 15.1 15.3 7.2.6. Summary & Outlook Given the relatively stable macroeconomic environment LQ WKH LQÀDWLRQ UDWH IRU WKH ¿UVW QLQH PRQWKV RI WKH \HDU ZDV SHU FHQW 7KLV WUDMHFWRU\ LPSOLHG VLQJOH GLJLW RXWWXUQ IRU +RZHYHU WKH \HDU ZDV PDUUHG E\ XQDQWLFLSDWHG VKRFNV +XUULFDQH ,YDQ DQG KLJK LQWHUQDWLRQDO RLO SULFHV ZKLFK OHG WR D GRXEOH GLJLWRXWWXUQ&RQWLQXHGVWDELOLW\LQWKHPDFURHFRQRPLF HQYLURQPHQW E\ ZD\ RI IRUHLJQ H[FKDQJH PDUNHW VWDELOLW\ IDYRXUDEOH ¿VFDO SHUIRUPDQFH DQG SUXGHQW GHPDQGPDQDJHPHQWE\WKH&HQWUDO%DQNVKRXOGUHVXOW LQFRQWDLQPHQWRIFRUHLQÀDWLRQWRWDUJHWHGOHYHOV Production and Prices 106 8. Banking and Currency Operations 8.1. Banking Services 8.2. Payment System Developments he Bank of Jamaica provides banking services The Bank of Jamaica remains committed to ensuring the WRWKH*RYHUQPHQWFRPPHUFLDOEDQNVSULPDU\ LQWHJULW\ DQG HI¿FLHQF\ RI WKH V\VWHPLFDOO\ LPSRUWDQW TGHDOHUV DQG UHJLRQDO FHQWUDO EDQNV ,W DOVR payment systems as a critical element of its mandate provides support and oversees the principal payment to ensure the soundness and stability of the Jamaican DQGVHWWOHPHQWV\VWHPVLQ-DPDLFD,QDGGLWLRQOLPLWHG ¿QDQFLDOV\VWHP$FFRUGLQJO\WKH%DQNFRQWLQXHVWR over-the-counter services are provided to the general initiate and facilitate developments designed to enhance SXEOLF WKHHI¿FLHQF\RIWKHVHV\VWHPV The Bank’s oversight role is facilitated through the ,Q -DPDLFD WKH PRVW FRPPRQ SD\PHQW LQVWUXPHQWV %DQN RI -DPDLFD$FW WKH %DQNLQJ$FW WKH )LQDQFLDO DUH FDVK FKHTXHV FDUGV GHELW FUHGLW VWRUHG YDOXH ,QVWLWXWLRQV $FW DV ZHOO DV &XUUHQF\ ,VVXH DQG DQGLQWHUEDQNWUDQVIHUV7KHUHKDYHEHHQLQQRYDWLRQV 5HGHPSWLRQ 6WDWXWHV ,Q DGGLWLRQ &OHDULQJ +RXVH with electronic payment instruments and a wide array 5XOHVFRGLI\WKHDUUDQJHPHQWVEHWZHHQPHPEHUEDQNV of banking products and services are being delivered LQFOXGLQJWKH%2- ZLWKUHVSHFWWRWKHORFDOFOHDULQJ WKURXJK HOHFWURQLF EDQNLQJ HEDQNLQJ FKDQQHOV RILQVWUXPHQWVGUDZQLQ-DPDLFD'ROODUVDQGWKHIRXU 'HVSLWHWKHVHGHYHORSPHQWVFKHTXHVUHPDLQWKHPRVW PDMRUIRUHLJQFXUUHQFLHV 86DQG&DQDGLDQGROODUVWKH commonly used payment form in Jamaica as they are (XURDQG3RXQG6WHUOLQJ XVHGIRUDZLGHYDULHW\RISD\PHQWWUDQVDFWLRQVUHWDLO DQGZKROHVDOH The Bank continues to provide vaulting and settlement VHUYLFHV WR WKH -DPDLFD &HQWUDO 6HFXULWLHV 'HSRVLWRU\ The two main payment systems in operation locally -&6' D ZKROO\ RZQHG VXEVLGLDU\ RI WKH -DPDLFD are the Central Bank-owned electronic funds transfer 6WRFN([FKDQJH/LPLWHG7KH-&6'¶VPDLQIXQFWLRQV V\VWHP WKH &XVWRPHU ,QTXLU\ DQG )XQGV 7UDQVIHU DUH WR SURYLGH VDIHNHHSLQJ RI VKDUHV DQG FHUWL¿FDWHV 6\VWHP &,)76 DQG WKH $XWRPDWHG &OHDULQJ +RXVH DQGWRIDFLOLWDWHPRUHHI¿FLHQWHTXLWLHVWUDGLQJZLWKD $&+ WKURXJK ZKLFK ORFDO FKHTXHV DUH FOHDUHG DQG shorter turnaround time for settlement and delivery of VHWWOHG )RU FKHTXHV PXOWLODWHUDO QHWWLQJ WDNHV SODFH FHUWL¿FDWHV twice daily and balances are settled on the books of WKH &HQWUDO %DQN ZKLOH &,)76 SD\PHQWV DUH VHWWOHG The Bank also facilitates the settlement of regional JURVV%RWKFKHTXHVDQG&,)76SD\PHQWVDUHVHWWOHG SD\PHQWV WKURXJK &$5,&20 ELODWHUDO DUUDQJHPHQWV in Central Bank assets at the end of the day through a ZLWKFHQWUDOEDQNVDVZHOODVWKHH[FKDQJHRI&$5,&20 GHIHUUHGVHWWOHPHQWDUUDQJHPHQW FXUUHQFLHV Bank of Jamaica +DYLQJ VXFFHVVIXOO\ LPSOHPHQWHG WKH ¿UVW SKDVH SURSULHWDU\WUDQVDFWLRQVZHUHDSSUR[LPDWHO\ RI WKH $&+ WZR \HDUV DJR IRU FKHTXH FOHDULQJ DQG ELOOLRQRUSHUFHQWRIFKHTXHVSURFHVVHG VHWWOHPHQWWKHFOHDULQJEDQNVDUHQRZLQWKHSURFHVV Total cheque payments increased by 10 per cent RILPSOHPHQWLQJWKHVHFRQGSKDVHZKLFKZLOOVHHWKH WR ELOOLRQLQ electronic processing of direct debits and direct credits IRUSD\UROOGLYLGHQGVSHQVLRQVHWF 7KHSURMHFWLV b) Automatic Banking Machines/Point of scheduled for implementation in DQGVXSSRUWVWKH Sale Terminals %DQN¶VREMHFWLYHIRUSD\PHQWV\VWHPPRGHUQL]DWLRQ $XWRPDWHG EDQNLQJ PDFKLQHV $%0V DQG 8.2.1. Payment System Transactions SRLQW RI VDOH WHUPLQDOV 326 WUDQVDFWLRQV UHÀHFWHG WKH PRVW VLJQL¿FDQW JURZWK LQ a) Cheques ZKHQFRPSDUHGWRRWKHUSD\PHQWIRUPVVXFK DVFKHTXHVDQGFDVK7KHUHZHUHPLOOLRQ ,Q WKH %DQN SURYLGHG FKHTXH FOHDULQJ $%0326 WUDQVDFWLRQV DFURVV WKH 0XOWLOLQN DQGVHWWOHPHQWIDFLOLWLHVWKURXJKWKH$&+IRU QHWZRUNSHUFHQWRYHUWKHOHYHOLQ PLOOLRQ LWHPVYDOXHGDW-ELOOLRQ 7KLV PD\ EH UHÀHFWLYH RI EXR\DQF\ LQ UHWDLO 7KLVFRPSDUHVWRPLOOLRQLWHPVYDOXHGDW activity in the economy and the increasing - ELOOLRQH[FKDQJHGLQWKHFOHDULQJLQ DFFHSWDQFH RI HOHFWURQLF SD\PHQW PHGLD ,Q WUDQVDFWLRQ YDOXHV LQFUHDVHG E\ SHU FHQWWRELOOLRQ see Chart 24 7KH FKHTXHV SURFHVVHG WKURXJK WKH $&+ represent a fraction of the overall cheque usage $WRWDORI$%0¶VDQG 326WHUPLQDOV DVWKH\H[FOXGHSURSULHWDU\WUDQVDFWLRQVWKDWLV ZHUHLQVWDOOHGLQDQLQFUHDVHRI SHU those items encashed or deposited at the bank on FHQW DQG SHU FHQW UHVSHFWLYHO\ RYHU WKH ZKLFKWKH\DUHGUDZQ3URSULHWDU\WUDQVDFWLRQV SUHYLRXV\HDU This brings the total number of LQ ZHUH DSSUR[LPDWHO\ - ELOOLRQ $%0 DQG 326 WHUPLQDOV WR DQG accounting for approximately 48 per cent of UHVSHFWLYHO\ WRWDO ORFDO FXUUHQF\ FKHTXHV SDLG ,Q Chart 24 #$ % ! ! " 29 Jamaica Dollar items only are processed by Automated Clearing House (ACH). Banking and Currency Operations 108 Annual Report 2004 c) CIFTS 8.3. Currency Operations 8.3.1. Currency in Circulation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urrency Issued d) Foreign Currency Items The Bank of Jamaica oversees the manual 'XULQJWKH\HDUPLOOLRQEDQNQRWHVYDOXHGDW exchange of foreign items issued by or drawn ELOOLRQ ZHUH LVVXHG 7KLV ZDV SHU FHQW DERYH RQORFDOFRPPHUFLDOEDQNV WKHYDOXHLVVXHGLQ7KHDQGQRWHV DFFRXQWHGIRUSHUFHQWDQGSHUFHQWUHVSHFWLYHO\ )RUHLJQFXUUHQF\LWHPVWRWDOOLQJ86ELOOLRQ RIWRWDOYDOXHRIQRWHVLVVXHG ZHUHFOHDUHGORFDOO\LQ7KLVUHSUHVHQWV 2I WKH DQG QRWHV LVVXHG DSSUR[LPDWHO\ an increase of approximately 4 per cent over SHU FHQW ZHUH QHZ ZLWK WKH EDODQFH EHLQJ $%0 WKH86ELOOLRQH[FKDQJHGLQ ¿W 7KLV LV UHÀHFWLYH RI WKH LQFUHDVLQJ XVHIXO OLIH RI WKHVH GHQRPLQDWLRQV )RU WKH ORZHU GHQRPLQDWLRQV ,Q-DQXDU\WKHIRUHLJQFXUUHQF\FOHDULQJ DQGWKHVLWXDWLRQZDVGLIIHUHQWDV DQG exchange was expanded to include items issued SHU FHQW UHVSHFWLYHO\ RI WKHVH QRWHV ZHUH QHZ 7KHVH by or drawn on local commercial banks in the ORZHUGHQRPLQDWLRQVKDYHVKRUWHUDYHUDJHXVHIXOOLYHV PDMRU QRQ86 IRUHLJQ FXUUHQFLHV QDPHO\ DSSUR[LPDWHO\HLJKWPRQWKVFRPSDUHGWRWKHKLJKYDOXH &DQDGLDQ GROODU (XUR DQG 3RXQG 6WHUOLQJ QRWHV ZKLFK KDYH DYHUDJH XVHIXO OLYHV RI PRUH WKDQ Foreign Currency items are not settled in the WZHOYHPRQWKV Central Bank using central bank assets but are settled bilaterally on a net basis by wire transfers &RLQV LVVXHG ZHUH YDOXHG DW PLOOLRQ PDUJLQDOO\ WRIURP FRUUHVSRQGHQW EDQN DFFRXQWV KHOG E\ OHVV WKDQ WKH PLOOLRQ LVVXHG LQ 7KH the FOHDULQJEDQNV,WHPVYDOXHGDW&'1 GHQRPLQDWLRQDFFRXQWHGIRU SHUFHQWRIWKHWRWDOYDOXH PLOOLRQ*%3PLOOLRQDQG(XURPLOOLRQ IROORZHGE\WKHZLWKSHUFHQW'HPDQGIRUWKH ZHUHH[FKDQJHGGXULQJWKH\HDU GHQRPLQDWLRQUHPDLQHGVWURQJDV PLOOLRQSLHFHV ZHUHLVVXHGSHUFHQWDERYH7KLVZDV largely WRPHHWWKHJURZLQJQHHGVRIWKHUHWDLOVHFWRU Banking and Currency Operations Bank of Jamaica Chart 25a Chart 25b ! !" Chart 26a Chart 26b ! " ! " # 8.3.3. Redemptions and Banknote Processing $OO EDQNQRWHV UHGHHPHG DUH SURFHVVHG WKURXJK DQ HOHFWURQLF VFDQQLQJ PDFKLQH WR YHULI\ GHQRPLQDWLRQ $WRWDORIPLOOLRQEDQNQRWHVYDOXHGDW ELOOLRQ DXWKHQWLFLW\DQG¿WQHVV%DQNQRWHVYHUL¿HGDVJHQXLQH ZHUHUHGHHPHGGXULQJ7KLVZDVDQLQFUHDVHRI DQGGHHPHG¿WIRUUHFLUFXODWLRQDUHSDFNDJHGIRUUHLVVXH SHUFHQWRYHU7KHQRWHDFFRXQWHGIRU SHU WRWKHSXEOLF7KRVHGHHPHGXQ¿WIRUUHFLUFXODWLRQDUH FHQWRIUHGHPSWLRQVZKLOHWKHQRWHZDVSHUFHQW VKUHGGHGDXWRPDWLFDOO\ RIWRWDOUHGHPSWLRQ7KHVHKLJKHUYDOXHGHQRPLQDWLRQV DFFRXQWHG IRU DQG SHU FHQW UHVSHFWLYHO\ E\ ,QEDQNQRWHVWRWDOLQJ PLOOLRQSLHFHVYDOXHG YROXPH 2Q WKH RWKHU KDQG WKH GHQRPLQDWLRQ DW ELOOLRQ ZHUH SURFHVVHG 2I WKLV QXPEHU DFFRXQWHGIRURQO\SHUFHQWRIWKHUHGHPSWLRQYDOXH per cent were destroyed and the remainder reissued as EXWWKHODUJHVWYROXPHZLWK PLOOLRQSLHFHVRU $%0¿W SHUFHQW7KHGHQRPLQDWLRQFRQWLQXHGWREHWKH &RLQVWRWDOLQJPLOOLRQSLHFHVDQGYDOXHGDW PRVWKLJKO\XVHGRIQRWHVLQFLUFXODWLRQ PLOOLRQZHUHUHGHHPHGDQGSURFHVVHGGXULQJWKH\HDU Banking and Currency Operations 110 Annual Report 2004 7KH FRLQ ZDV WKH YROXPH OHDGHU ZLWK PLOOLRQ SLHFHVRU SHUFHQW 8.3.4.Public Detection and Counterfeit Education The number of counterfeit notes processed by the Bank RI-DPDLFDLQFUHDVHGE\ SHUFHQWLQDV FRXQWHUIHLWDQGQRWHVZHUHLGHQWL¿HG $VLQSUHYLRXV\HDUVPRVWRIWKHVHQRWHV SHUFHQW ZHUH GHWHFWHGE\WKHFRPPHUFLDOEDQNVDWWKHLUFRXQWHUV%\ YDOXHWKHFRXQWHUIHLWVGHWHFWHGLQFUHDVHGWRPLOOLRQ LQIURPPLOOLRQLQ:KLOHWKHSHUFHQWDJH increase appears high the proportion of counterfeit notes LVVWLOOLQVLJQL¿FDQWDYHUDJLQJOHVVWKDQSHUFHQWRI QRWHVSURFHVVHGDQGUHGHHPHG 7KHQRWHFRQWLQXHVWREHWKHWDUJHWRIFRXQWHUIHLWHUV DFFRXQWLQJIRUSHUFHQWDQGSHUFHQWRIWKHYROXPH DQGYDOXHRIFRXQWHUIHLWVUHVSHFWLYHO\*HQHUDOO\WKH quality of counterfeit notes in circulation remains poor and members of the public easily recognize the notes if WKH\DUHWUDQVDFWLQJEXVLQHVVLQDSURSHUO\OLWDUHD $JDLQVWWKLVEDFNJURXQGWKH%DQNLQWHQVL¿HGLWVSXEOLF education programme to enable large volume cash KDQGOHUVWREHWWHUDXWKHQWLFDWHWKHLUEDQNQRWHV7KURXJK DVHULHVRIVHPLQDUVWKHHPSOR\HHVRIFRPPHUFLDOEDQNV bill payment companies and other agencies were trained to recognize the public and inspector levels of security IHDWXUHVHPEHGGHGLQWKHEDQNQRWHV Banking and Currency Operations 111 9. Financial Legislation to include more comprehensive provisions 9.1. The Bank of Jamaica (Amendment) Act in relation to the sharing of information with 2004 overseas regulators with the appropriate PHFKDQLVPV IRU FRQWURO 7KLV$FW ZDV DOVR Q )HEUXDU\ WKH %DQN RI -DPDLFD amended to increase the penalties applicable $FW ZDVDPHQGHGWRJLYHWKH%DQNRI IRUEUHDFKRIWKHFRQ¿GHQWLDOLW\REOLJDWLRQVRQ 2Jamaica regulatory powers in respect of the the part of the Bank in relation to disclosures RSHUDWLRQVRI0RQH\7UDQVIHUDQG5HPLWWDQFH$JHQWV RWKHU WKDQ IRU WKH SXUSRVHV RI WKLV $FW WKH DQG$JHQFLHV %DQNLQJ $FW RU WKH )LQDQFLDO ,QVWLWXWLRQV $FW DQ\ LQIRUPDWLRQ UHJDUGLQJ WKH DIIDLUV RI The Banking (Licences Form of Application and DFXVWRPHURIDFRPPHUFLDOEDQNRUVSHFL¿HG Fees) Regulations, 1973 (Validation and Indemnity) ¿QDQFLDO LQVWLWXWLRQ REWDLQHG LQ FRQVHTXHQFH Act, 2004 of the performance of duties under the Bank of -DPDLFD$FW 7KH%DQNLQJ /LFHQFHV)RUPRI$SSOLFDWLRQDQG)HHV 5HJXODWLRQV 9DOLGDWLRQ DQG ,QGHPQLW\ $FW LL 7KH %DQNLQJ $FW )LQDQFLDO ,QVWLWXWLRQV ZDVSDVVHGLQWRODZRQ'HFHPEHUDQG $FW DQG %XLOGLQJ 6RFLHWLHV $FW ZHUH came LQWRHIIHFWLQ-DQXDU\7KLV$FWZLOOYDOLGDWH DPHQGHG WR LQFOXGH D GH¿QLWLRQ RI and indemnify the Bank from liability for acts done in µFRPSHWHQWDXWKRULW\¶7KHVHVWDWXWHVZHUH good faith in enforcing the provisions of the Banking DOVR DPHQGHG WR JLYH WKH 6XSHUYLVRU RI /LFHQFHV )RUPRI$SSOLFDWLRQDQG)HHV 5HJXODWLRQV Banks the power to take regulatory action LQFOXGLQJ WKH UHYRFDWLRQ RI OLFHQFHV LQ any case where a licensee is found to be The Bank of Jamaica Act, 1960, The Banking in breach of criminal statutes relating to Act, 1992 (BA), The Financial Institutions Act, money laundering or any other statute 1992 (FIA) and The Building Societies Act, 1897 UHODWLQJWR¿QDQFLDOFULPH (BSA) $PHQGPHQWV ZHUH PDGH WR WKH %DQNLQJ $FW WKH %\YLUWXHRIDPHQGPHQWVSDVVHGLQ'HFHPEHUWKH )LQDQFLDO ,QVWLWXWLRQV $FW DQG WKH %XLOGLQJ 6RFLHWLHV following changes were effected to the abovementioned $FWWRDGGUHVVWKHIROORZLQJVKRUWIDOOVDQGHUURUV VWDWXWHV L In respect of the Banking Act, L 7KH %DQN RI -DPDLFD $FW was amended the Financial Institutions Act and the Building Societies Act- 112 Annual Report 2004 should also have been made 7KHGH¿QLWLRQIRU³regulated or supervised to any other references in institution” was expanded to include these statutes to sub-section ¿QDQFLDOLQVWLWXWLRQVLQIRUHLJQMXULVGLFWLRQV D +RZHYHU WKHVH that are regulated or supervised by consequential amendments authorities bearing similar supervisory or ZHUHQRWGRQH7KHUHZDVD regulatory responsibilities as those carried IXUWKHUHUURUXQGHUWKH),$LQ out by the Bank of Jamaica or the Financial that the reference in paragraph 6HUYLFHV&RPPLVVLRQ RI 3DUW ' RI WKH 6HFRQG 6FKHGXOH RI WKH )LQDQFLDO (ii) In respect of the Banking Act and the ,QVWLWXWLRQV $FW ZDV PDGH WR Financial Institutions Act - VHFWLRQ F LQVWHDG RI VHFWLRQ D ZKLFK SULRU D $Q RIIHQFHPDNLQJ SURYLVLRQ to the amendments effected ZDV LQVHUWHG LQ 6HFWLRQ LQZRXOGKDYHEHHQWKH RI WKH %DQNLQJ $FW DQG WKH correct provision to which )LQDQFLDO ,QVWLWXWLRQV $FW reference should have been by amendments effected in PDGH 2002 +RZHYHU WKH UHOHYDQW amendment addressed only the F 8QGHU WKH )LIWK 6FKHGXOH instance of non-compliance with a typographical error was the obligation to submit audited LGHQWL¿HG LQ WKH UHIHUHQFH ¿QDQFLDO VWDWHPHQWV DV UHTXLUHG WR WKH VHFWLRQ RIIHQFH XQGHU 6HFWLRQ DQG RPLWWHG ZKLFKLQGLFDWHGD¿[HGSHQDOW\ to address the situation where RI LQVWHDG RI WKH a bank or licensee under the LQWHQGHG )LQDQFLDO ,QVWLWXWLRQV $FW GRHV not comply with the directions LLL In respect of the Banking Act - the RI WKH 6XSHUYLVRU LVVXHG XQGHU 7KLUG 6FKHGXOH HUURQHRXVO\ UHIHUV WR DQ 6HFWLRQ RIIHQFH XQGHU VHFWLRQ ZKHUHDV WKH reference should be to an offence under E %\ YLUWXH RI DPHQGPHQWV VHFWLRQ HIIHFWHG LQ WR 6HFWLRQ 6HFWLRQ D ZDV LY In respect of the Financial Institutions deleted and replaced with the Act – 6XEVHFWLRQV $ % DQG & Consequential amendments D ,Q 6XEVHFWLRQ WKH Financial Legislation 113 Bank of Jamaica brackets around the numerals whereby the erroneous should have been deleted and UHIHUHQFH LQ WKH VHFWLRQ the reference in this subsection offence to a “bank” and its WR 3DUW % RI WKH 6HFRQG subsidiaries was amended to 6FKHGXOH VKRXOG KDYH EHHQ the correct reference which revised to refer to Part C of is to “a licensee” and its WKH 6HFRQG 6FKHGXOH ZKLFK 6XEVLGLDULHV LV WKH FRUUHFW UHIHUHQFH DV Y In respect of the Building Societies Act Part B was deleted by virtue of the penalties applicable for offences under the DPHQGPHQWVPDGHLQ WR %XLOGLQJ6RFLHWLHV$FWZHUHQRWV\QFKURQL]HG WKLV$FW with those applicable to similar offences under WKH%DQNLQJ$FWDQGWKH)LQDQFLDO,QVWLWXWLRQV E ,Q 6XEVHFWLRQ WKH $FW brackets around the numerals referred to therein should have PENDING AMENDMENTS TO THE FINANCIAL EHHQGHOHWHG LEGISLATION F ,Q UHODWLRQ WR WKH 7KLUG The Cooperative Societies (Amendment) Bill 6FKHGXOH WKHUH ZDV DQ erroneous reference in the 7KH&RRSHUDWLYH6RFLHWLHV $PHQGPHQW %LOOZLOOVHHN 6HFWLRQ RIIHQFH WR DQ to restrict the deposit-taking activities of cooperative DSSOLFDEOH ¿QH RI societies to those cooperative societies which operate on conviction instead of the DVFUHGLWXQLRQV6HFRQGO\WKLV%LOOZLOOVHHNWREULQJ LQWHQGHG¿QHRI credit unions under the regulatory ambit of the Minister RI)LQDQFHDQGWKH%DQNRI-DPDLFD G ,Q UHODWLRQ WR WKH 7KLUG NEW REGULATIONS 6FKHGXOHWKHUHZDVDUHSHWLWLRQ of an offence that was already The Banking (Capital Adequacy) Regulations, incorporated in the Third 2004 The Financial Institutions (Capital Adequacy) 6FKHGXOH DQG DQ HUURQHRXV Regulations, 2004 UHIHUHQFH WKHUHLQ WR D 6HFWLRQ RIIHQFH LQVWHDG RI WKH 7KHVH5HJXODWLRQVFDPHLQWRHIIHFWRQ0DUFK FRUUHFW UHIHUHQFH WR D 6HFWLRQ and establish a risk based method of assessing capital RIIHQFH DGHTXDF\ RI ¿QDQFLDO LQVWLWXWLRQV ZLWK WKH UHTXLVLWH capital requirement being prescribed by the risk H 5HYLVLRQRIWKH)LIWK6FKHGXOH DWWDFKHG WR WKH LQVWLWXWLRQ¶V DVVHWV 7KH SDVVDJH RI Financial Legislation 114 Annual Report 2004 WKHVH5HJXODWLRQVUHSHDOV7KH%DQNLQJ &DSLWDO%DVH that auditors who are proposed as the statutory auditors 5HJXODWLRQV DQGWKH)LQDQFLDO,QVWLWXWLRQ &DSLWDO RI¿QDQFLDOLQVWLWXWLRQVDUHLQGHSHQGHQWRIWKH¿QDQFLDO %DVH 5HJXODWLRQV LQVWLWXWLRQVEHLQJDXGLWHG PENDING FINANCIAL REGULATIONS 7KH %DQNLQJ &UHGLW &ODVVL¿FDWLRQ DQG Provisioning) Regulations The Bank of Jamaica (Building Societies) Regulations These regulations will formally impose the measures WKDWEDQNVDUHUHTXLUHGWRWDNHLQDVVHVVLQJFUHGLWWDNLQJ 7KHVH5HJXODWLRQVDUHEHLQJUHYLVHGWRSODFHEXLOGLQJ security and making provisions for the possibility of societies on an even footing with other regulated deposit- GHIDXOW WDNLQJ ¿QDQFLDO LQVWLWXWLRQV LH EDQNV DQG PHUFKDQW EDQNV 7KHVHUHYLVHGUHJXODWLRQVZLOOWKHUHIRUH Bank of Jamaica (Credit Union) Regulations These regulations will establish the Bank’s regulatory D LQFRUSRUDWH VRPH RI WKH DPHQGPHQWV jurisdiction over the operations of credit unions and cover DOUHDG\ HIIHFWHG WR WKH %$ DQG ),$ DUHDVLQFOXGLQJOLFHQVLQJFDSLWDOUHVHUYHVSURKLELWHG in March 2002 including introducing EXVLQHVVUHPHGLDODQGLQWHUYHQWLRQSURFHVVHVDQGWKH a regime for building societies to pay UROHRIFUHGLWXQLRQDVVRFLDWLRQV ¿[HGSHQDOWLHVIRUFHUWDLQEUHDFKHVRI WKH5HJXODWLRQV Non-Financial Legislative Amendments E FRUUHFW H[LVWLQJ LQFRQVLVWHQFLHV LQ The Bank is involved in the process of formulating the penalty provisions in the existing FHUWDLQ LWHPV RI QRQ¿QDQFLDO OHJLVODWLRQ E\ YLUWXH RI UHJXODWLRQVDQGXSGDWH¿QHV DQG WKH IDFW WKDW WKH 'HSXW\ 6XSHUYLVRU RI %DQNV FKDLUV the Financial Crimes Legislative Task Force which F VLPSOLI\ WKH DUUDQJHPHQW RI WKH ZDV HVWDEOLVKHG LQ 1RYHPEHU E\ WKH 0LQLVWHU 5HJXODWLRQV RI )LQDQFH 7KLV 7DVN )RUFH LV FKDUJHG ZLWK WKH responsibility of identifying and pursuing legislative The Building Societies (Licence Fees) Regulations UHIRUPVQHHGHGWRERRVW-DPDLFD¶V¿JKWDJDLQVWPRQH\ ODXQGHULQJDQGRWKHU¿QDQFLDOFULPHV 7KHVH 5HJXODWLRQV ZLOO EH UHYLVHG WR EULQJ WKH IHHV payable in line with the applicable fees under the 2003 The Money Laundering Act, 1998 The Money Laundering Regulations, 1998 /LFHQFH)HHV5HJXODWLRQVXQGHUWKH%DQNLQJ$FWDQG WKH)LQDQFLDO,QVWLWXWLRQV$FW 7KH 0RQH\ /DXQGHULQJ &KDQJH RI 1DPH DQG 7KH %DQNLQJ 4XDOL¿FDWLRQ RI $XGLWRUV $PHQGPHQW %LOOZDVWDEOHGLQ3DUOLDPHQWLQ2FWREHU Regulations DQG VXEPLWWHGWR WKH-RLQW 6HOHFW&RPPLWWHHRI These regulations will create a framework for ensuring 3DUOLDPHQW LQ 'HFHPEHU +RZHYHU DV WKHUH Financial Legislation Bank of Jamaica ZHUH VWLOO VRPH RXWVWDQGLQJ LVVXHV ZLWK WKLV %LOO LQ1RYHPEHU$PLQRULW\UHSRUWFRQWDLQLQJWKH &RQVHTXHQWO\ WKH -RLQW 6HOHFW &RPPLWWHH SURFHVV FRQFHUQVVRPHPHPEHUVRIWKH-RLQW6HOHFW&RPPLWWHH was suspended to facilitate the Technical Committee’s VWLOOKDGZLWKWKHSURSRVHG7HUURULVP3UHYHQWLRQ%LOO UHVROXWLRQ RI WKHVH LVVXHV 7KH7HFKQLFDO &RPPLWWHH ZDVDOVRWDEOHGLQ3DUOLDPHQWLQ1RYHPEHU comprises the members of the Financial Crimes Legislative Task Force and the Legal Committee which ,IWKLV%LOOLVSDVVHGLQWRODZLWZLOODPRQJRWKHUWKLQJV provides technical and legal advice throughout the VSHFL¿FDOO\ LPSRVH UHSRUWLQJ DQG RWKHU SURFHGXUDO FRXUVHRIWKHOHJLVODWLYHSURFHVV UHTXLUHPHQWVRQ¿QDQFLDOLQVWLWXWLRQVWRPLQLPLVHWKH SRVVLELOLW\RIWKHVHUYLFHVRIWKH¿QDQFLDOVHFWRUEHLQJ 7KH0RQH\/DXQGHULQJ$FW 0/$ LVEHLQJDPHQGHG XVHGLQDQ\ZD\WRIDFLOLWDWHWKH¿QDQFLQJRIWHUURULVW to incorporate requirements mandated by the Financial DFWLYLWLHV7KHSDVVDJHRIWKLV%LOOZLOOEHDPDMRUVWHSLQ $FWLRQ 7DVN )RUFH )$7)¶V UHYLVHG $0/ $QWL the satisfaction of Jamaica’s obligations to act in concert PRQH\/DXQGHULQJUHFRPPHQGDWLRQVDQGWKH)$7)¶V ZLWK RWKHU QDWLRQV LQ FRPEDWLQJ WHUURULVP LQFOXGLQJ &RPEDWLQJWKH)LQDQFLQJRI7HUURULVP &)7 VSHFLDO IXOO\ LPSOHPHQWLQJ 8QLWHG 1DWLRQV 5HVROXWLRQ UHFRPPHQGDWLRQV7KH0RQH\/DXQGHULQJ5HJXODWLRQV DQG RWKHU international instruments relating to are also being revised to provide more VSHFL¿FGHWDLOV WHUURULVP of the anti-money laundering practices and procedures The Financial Investigations Division Bill WKDW¿QDQFLDOLQVWLWXWLRQVDUHH[SHFWHGWRKDYHLQSODFH 7KH)LQDQFLDO,QYHVWLJDWLRQV'LYLVLRQ%LOOVHHNVWRVDWLVI\ There have already been related amendments in the Jamaica’s obligation to comply with recommendation ¿QDQFLDOOHJLVODWLRQWRHQKDQFHWKHDELOLW\RIWKH¿QDQFLDO RIWKH )$7) UHYLVHG 5HFRPPHQGDWLRQVZKLFK regulators to share information with other supervisory VWDWHVWKDW DXWKRULWLHV DQG ODZ HQIRUFHPHQW DJHQWV 7KLV ZLOO also expressly allow supervisory authorities to take ³&RXQWULHV VKRXOG HVWDEOLVK D )LQDQFLDO regulatory action in response to the non-compliance Intelligence Unit that serves as a national RI¿QDQFLDOLQVWLWXWLRQVZLWKWKHLUVWDWXWRU\REOLJDWLRQV center for the receiving, analysis…and XQGHUVWDWXWHVVXFKDVWKH0RQH\/DXQGHULQJ$FW dissemination of suspicious transaction UHSRUWV DQG RWKHU ¿QDQFLDO LQIRUPDWLRQ The Terrorism Prevention Bill regarding money laundering or terrorist The Terrorism Prevention Bill was tabled in Parliament ¿QDQFLQJ´ GXULQJ2FWREHUDQGWKHQSODFHGEHIRUHWKH-RLQW $OOLHGWRWKLV5HFRPPHQGDWLRQLVWKH)$7)DGYLVRU\WKDW 6HOHFW&RPPLWWHHRI3DUOLDPHQWIRUGHEDWH7KH-RLQW VXFK XQLW ZKHQ HVWDEOLVKHG VKRXOG FRQVLGHU DSSO\LQJ 6HOHFW&RPPLWWHHSURFHVVHQGHGLQ2FWREHUDQG for membership in the Egmont Group30 F the report of that Committee was tabled in Parliament 30 “7KH(JPRQW*URXSLVDQLQIRUPDOJURXSRI¿QDQFLDOLQWHOOLJHQFHXQLWV ),8V HVWDEOLVKHGLQ 7KHJURXSZDVVRQDPHGIRUWKH ORFDWLRQRIWKH¿UVWPHHWLQJDWWKH(JPRQW$UHQEHUJ3DODFHLQ%UXVVHOV7KHJRDORIWKLVJURXSLVWRSURYLGHDIRUXPIRU),8VWRLPSURYH support to their respective national anti-money laundering programmes. Financial Legislation 116 10. Administration 10.1. Overview of the Year 2004 'XULQJ WKH \HDU WKH %DQN UHFUXLWHG WKLUW\IRXU SHUPDQHQW DQG HLJKW FRQWUDFW RI¿FHUV 7KH QHZ Q WKH %DQN¶V PDQDJHPHQW H[SHULHQFHG UHFUXLWVLQFOXGHGHOHYHQ SHUVRQVZLWKSRVWJUDGXDWH VHYHUDO RSHUDWLRQDO FKDOOHQJHV 7KHVH LQFOXGHG WUDLQLQJ VL[WHHQ ZLWK EDFKHORU¶V GHJUHHV ZKLOH the retention and recruitment of experienced WKH UHPDLQLQJ ¿IWHHQ SRVVHVVHG D FRPELQDWLRQ , RI DGPLQLVWUDWLYH DQG FOHULFDO VNLOOV7KH %DQN¶V VWDII DQG TXDOL¿HG VWDII WKH PDLQWHQDQFH RI D KDUPRQLRXV industrial relations environment in the context of public complement totalled four hundred and eighty-four sector wage restraint and ensuring that the main plant DW'HFHPEHUUHODWLYHWRDQHVWDEOLVKPHQW and external properties were safe and secured from the RI¿YHKXQGUHGDQGWKLUW\QLQH HIIHFWVRIQDWXUDOGLVDVWHUVDQGHQYLURQPHQWDOKD]DUGV $FFRUGLQJO\ GXULQJ WKH \HDU UHQHZHG HIIRUWV ZHUH ,WLVLPSRUWDQWWRQRWHWKDWQRWZLWKVWDQGLQJUHFUXLWPHQW GHYRWHGWRVWUHQJWKHQLQJLQGXVWULDOUHODWLRQVLQWKH%DQN HIIRUWVLQWKHDWWULWLRQUDWHLQFUHDVHGWRSHUFHQW SDUWLFXODUO\WKURXJKLPSURYHGLQWHUQDOFRPPXQLFDWLRQV LQIURPSHUFHQWLQ7KHLQFUHDVLQJDWWULWLRQ Upgrading of the plant and physical infrastructure and a UDWHLVDQDUHDRIFRQFHUQWRWKH%DQN¶VPDQDJHPHQW review of the organization’s contingency plans and the moreso in the context of the current salary restraint and articulation of a strategic plan for business continuity the relative attractiveness of Bank of Jamaica trained WRRNSODFHLQ SHUVRQQHOLQWKHORFDODQGRYHUVHDVPDUNHWV 6WDI¿QJ 10.3. Training & Development $JDLQVW WKH EDFNJURXQG RI WKH 0HPRUDQGXP RI 7RIXUWKHUHQKDQFHWKHVWDII¶VVNLOOVHWDQGFRPSHWHQFLHV 8QGHUVWDQGLQJ 028 VLJQHG RQ )HEUXDU\ the Bank hosted several training and staff development between the Government of Jamaica and the Jamaica SURJUDPPHV GXULQJ WKH \HDU 7UDLQLQJ LQWHUYHQWLRQV &RQIHGHUDWLRQRI7UDGH8QLRQV -&78 ZKLFKLPSRVHG ZHUHE\ZD\RIVHPLQDUVZRUNVKRSVFRQIHUHQFHVDQG DWZR \HDUIUHH]HRQSXEOLFVHFWRUVDODULHVWKH%DQN DWWDFKPHQWV ZLWK LQWHUQDWLRQDO RUJDQL]DWLRQV 7KHVH ZDVIXUWKHUFRQVWUDLQHGLQLWVHIIRUWVWRUHFUXLWTXDOL¿HG exposed members of staff to areas such as international VWDII SDUWLFXODUO\ ¿QDQFLDO DQDO\VWV HFRQRPLVWV DQG EHVW SUDFWLFHV LQ ¿QDQFLDO LQVWLWXWLRQ VXSHUYLVLRQ LQIRUPDWLRQWHFKQRORJ\VSHFLDOLVWV7KH028ZKLFK QHZ DSSURDFKHV LQ ¿QDQFLDO DVVHVVPHQW DQG DQDO\VLV ZLOOUHPDLQLQHIIHFWIURP$SULOWR0DUFK HFRQRPLFSROLF\IRUPXODWLRQDQGPDQDJHPHQWDVZHOO FRLQFLGHVZLWKWKH%DQN¶VWZR\HDU/DERXU0DQDJHPHQW DVSODQWPDQDJHPHQWDQGPDLQWHQDQFH FRQWUDFW F\FOH ZLWK WKH %XVWDPDQWH ,QGXVWULDO 7UDGH $ QRWDEOH IHDWXUH RI WKH %DQN¶V WUDLQLQJ SURJUDPPH 8QLRQ %,78 ZKLFKUHSUHVHQWVWKHXQLRQL]HGVWDII conducted in 2004 was the continuation of in-country WUDLQLQJSURJUDPPHV'XULQJWKH\HDUWKH%DQNKRVWHG Bank of Jamaica IRXU LQFRXQWU\ SURJUDPPHV 7KHVH ZHUH KHOG LQ 10.4. Plant and Physical Infrastructure collaboration with international organizations with ZKLFK WKH %DQN KDV HVWDEOLVKHG VWURQJ SDUWQHUVKLSV ,QWKH%DQNFRQWLQXHGHIIRUWVDWXSJUDGLQJDQG $PRQJ WKH LQVWLWXWLRQV ZHUH WKH &HQWUH IRU /DWLQ maintaining the physical infrastructure of the main $PHULFDQ0RQHWDU\6WXGLHV &(0/$ &URZQ$JHQWV SODQWDQGH[WHUQDOSURSHUWLHV7KHUHZHUHDOVRLQLWLDWLYHV RI /RQGRQ WKH %RDUG RI *RYHUQRUV RI WKH )HGHUDO DLPHGDWSURPRWLQJVDIHW\DQGKHDOWKDWWKHZRUNSODFH 5HVHUYH6\VWHPDQGWKH,QWHUQDWLRQDO$GYLVRU\*URXS FRQVLVWHQW ZLWK WKH SURSRVHG 2FFXSDWLRQDO 6DIHW\ RI WKH 2I¿FH RI WKH 6XSHULQWHQGHQW RI )LQDQFLDO +HDOWK $FW 26+$ H[SHFWHG WR EH LPSOHPHQWHG ,QVWLWXWLRQV 26), LQ ,Q DGGLWLRQ DQ HQYLURQPHQWDOO\ IULHQGO\ ¿UH VXSSUHVVLRQ V\VWHP ZDV LQVWDOOHG DQG VLJQL¿FDQW ,QFRXQWU\ WUDLQLQJ SURJUDPPHV DWWUDFWHG SDUWLFLSDQWV XSJUDGHVPDGHWRWKH%DQN¶VVHFXULW\V\VWHP IURP WKH &DULEEHDQ DQG /DWLQ $PHULFDQ 5HJLRQ LQFOXGLQJ*XDWHPDOD9HQH]XHOD8UXJXD\0H[LFRWKH %\ \HDUHQG WKH %DQN KDG PDGH VLJQL¿FDQW SURJUHVV %DKDPDV %ULWLVK 9LUJLQ ,VODQGV 7ULQLGDG 7REDJR in effecting rehabilitation work following the adverse WKH 1HWKHUODQGV$QWLOOHV %DUEDGRV DQG *X\DQD 7KH LPSDFWRI+XUULFDQH,YDQRQWKHPDLQSODQWDQGRWKHU collaborative efforts provided staff and participants H[WHUQDOSURSHUWLHVLQWKHVHFRQGKDOIRIWKH\HDU:KLOH from local and overseas institutions with information PXFKKDVEHHQDFFRPSOLVKHGWRGDWHVXEVWDQWLDOZRUN on current trends and practices in their respective remains to be done to upgrade the Bank’s infrastructure GLVFLSOLQHVDQGWKHH[SHULHQFHVRIRWKHULQVWLWXWLRQV to withstand more powerful weather systems (category KXUULFDQHV DQGRWKHUQDWXUDOGLVDVWHUV 2WKHU WUDLQLQJ LQWHUYHQWLRQV LQFOXGHG RYHUVHDV participation in courses on economic policy and SURJUDPPLQJ EDQN VXSHUYLVLRQ SD\PHQW V\VWHPV FXUUHQF\ PDQDJHPHQW FUHGLW DQDO\VLV ¿QDQFLDO ULVN PDQDJHPHQW DQG UHVHUYHV PDQDJHPHQW 7KH %DQN¶V 7UDLQLQJ ,QVWLWXWH DOVR DUUDQJHG VHYHUDO 6SHDNHUV¶ )RUXP SUHVHQWDWLRQV 7KHVH ZHUH KHOG RQ D TXDUWHUO\ EDVLV DQG DGGUHVVHG WRSLFDO LVVXHV VXFK DV HPRWLRQDO LQWHOOLJHQFH DQG VHFXULW\ DZDUHQHVV +XPDQ UHVRXUFH PDQDJHPHQWVDIHW\DQGKHDOWKDVZHOODVSHUVRQDODQG professional development programmes also received VSHFLDODWWHQWLRQ)RUWKHFDOHQGDU\HDUWKHUHZHUH SDUWLFLSDQWV LQ WUDLQLQJ SURJUDPPHV FRQGXFWHG ORFDOO\DQGRYHUVHDV Administration 118 11. Compensation of Executive Management Salary Range of Executive Management Allowances of Executive Management D *RYHUQRU E 'HSXW\*RYHUQRUV Notes Executive Management includes the Governor and three 'HSXW\*RYHUQRUV,QWKHFDVHRIWKH*RYHUQRUD PDLQWDLQHGUHVLGHQFHDQGDQRI¿FLDOFDUDUHSURYLGHGDV LVFXVWRPDU\IRU*RYHUQRUVRIWKH%DQNRI-DPDLFD)RU 'HSXW\*RYHUQRUVDIXOO\PDLQWDLQHGPRWRUYHKLFOHLV SURYLGHG(DFKPHPEHURIWKH([HFXWLYH0DQDJHPHQW LV HOLJLEOH IRU EHQH¿WV LQFOXGLQJ D QRQFRQWULEXWRU\ SHQVLRQSODQKHDOWKLQVXUDQFHOLIHLQVXUDQFHDQGVWDII ORDQV 12. Calendar of Monetary Policy Developments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of Finance determined that all debt securities or instruments issued by ,QWHUHVWUDWHVRQ%DQNRI-DPDLFD WKH *RYHUQPHQW RI -DPDLFD ZKHWKHU GD\GD\ GD\GD\GD\ denominated in Jamaican dollars or GD\ DQG GD\ RSHQ PDUNHW in a foreign currency and irrespective LQVWUXPHQWVZHUHUHGXFHGWRSHU RIWKHLURULJLQDOPDWXULW\WHUPVVKDOO FHQW SHU FHQW SHU FHQW within nine months of their maturity SHUFHQWSHUFHQWSHU GDWHEHGHVLJQDWHG/LTXLG$VVHWV FHQWDQGSHUFHQWUHVSHFWLYHO\ ,QWHUHVWUDWHVRQ%DQNRI-DPDLFD ,QWHUHVW UDWHV RQ %DQN RI -DPDLFD GD\GD\ GD\GD\GD\ GD\ GD\ GD\ DQG GD\ DQG GD\ RSHQ PDUNHW day open market instruments were LQVWUXPHQWVZHUHUHGXFHGWRSHU UHGXFHG WR SHU FHQW SHU FHQW SHU FHQW SHU FHQW FHQWSHUFHQWDQG SHUFHQW SHUFHQWSHUFHQWSHU UHVSHFWLYHO\ FHQWDQGSHUFHQWUHVSHFWLYHO\ ,QWHUHVWUDWHVRQ%DQNRI-DPDLFD ,QWHUHVWUDWHVRQ%DQNRI-DPDLFD GD\GD\DQGGD\RSHQPDUNHW GD\ GD\ GD\ GD\ LQVWUXPHQWVZHUHUHGXFHGWRSHU 120 Annual Report 2004 GD\ GD\ DQG GD\ RSHQ PDUNHW LQVWUXPHQWV ZHUH UHGXFHG WR SHU FHQWSHUFHQWSHUFHQW SHUFHQWSHUFHQWSHUFHQWDQG SHUFHQWUHVSHFWLYHO\ ,QWHUHVWUDWHVRQ%DQNRI-DPDLFDGD\ GD\ GD\GD\GD\GD\ DQGGD\RSHQPDUNHWLQVWUXPHQWVZHUH UHGXFHGWRSHUFHQWSHUFHQW SHU FHQW SHU FHQW SHU FHQW SHU FHQW DQG SHU FHQW UHVSHFWLYHO\ ,QWHUHVWUDWHVRQ%DQNRI-DPDLFDGD\ GD\ GD\GD\GD\GD\ DQGGD\RSHQPDUNHWLQVWUXPHQWVZHUH UHGXFHGWRSHUFHQWSHUFHQW SHU FHQW SHU FHQW SHU FHQW SHU FHQW DQG SHU FHQW UHVSHFWLYHO\ ,QWHUHVWUDWHVRQ%DQNRI-DPDLFDGD\ GD\ GD\GD\GD\GD\ DQGGD\RSHQPDUNHWLQVWUXPHQWVZHUH UHGXFHGWRSHUFHQW SHUFHQW SHU FHQW SHU FHQW SHU FHQW SHU FHQW DQG SHU FHQW UHVSHFWLYHO\ (Footnotes) Calendar of Monetary Policy Developments 121 Auditors’ Report KPMG KPMG Peat Marwick Chartered Accountants P.O. Box 76 The Victoria Mutual Building Telephone +1 (876) 922-6640 Kingston 6 Duke Street Telefax +1 (876) 922-7198 Jamaica Kingston +1 (876) 922-4500 Jamaica email:[email protected] TO BANK OF JAMAICA Auditors’ Report 3XUVXDQWWR6HFWLRQ RIWKH%DQNRI-DPDLFD$FWZHKDYHDXGLWHGWKH¿QDQFLDOVWDWHPHQWVRI%DQN of Jamaica (the Bank), set out on pages ii to xxvii, and have obtained all the information and explanations ZKLFKZHUHTXLUHG7KH¿QDQFLDOVWDWHPHQWVDUHWKHUHVSRQVLELOLW\RIWKH%DQN¶VPDQDJHPHQW2XU UHVSRQVLELOLW\LVWRH[SUHVVDQRSLQLRQRQWKH¿QDQFLDOVWDWHPHQWVEDVHGRQRXUDXGLW :HFRQGXFWHGRXUDXGLWLQDFFRUGDQFHZLWK,QWHUQDWLRQDO6WDQGDUGVRQ$XGLWLQJ7KRVHVWDQGDUGVUHTXLUHWKDWZH SODQDQGSHUIRUPWKHDXGLWWRREWDLQUHDVRQDEOHDVVXUDQFHDERXWZKHWKHUWKH¿QDQFLDOVWDWHPHQWVDUHIUHHRIPDWHULDO PLVVWDWHPHQWV$QDXGLWLQFOXGHVH[DPLQLQJRQDWHVWEDVLVHYLGHQFHVXSSRUWLQJWKHDPRXQWVDQGGLVFORVXUHVLQ WKH¿QDQFLDOVWDWHPHQWV$QDXGLWDOVRLQFOXGHVDVVHVVLQJWKHDFFRXQWLQJSULQFLSOHVXVHGDQGVLJQL¿FDQWHVWLPDWHV PDGHE\PDQDJHPHQWDVZHOODVHYDOXDWLQJWKHRYHUDOOSUHVHQWDWLRQRIWKH¿QDQFLDOVWDWHPHQWV:HEHOLHYHWKDW RXUDXGLWSURYLGHVDUHDVRQDEOHEDVLVIRURXURSLQLRQ ,QRXURSLQLRQSURSHUDFFRXQWLQJUHFRUGVKDYHEHHQNHSWDQGWKH¿QDQFLDOVWDWHPHQWVZKLFKDUHLQDJUHHPHQW WKHUHZLWKDQGKDYHEHHQSUHSDUHGLQDFFRUGDQFHZLWK,QWHUQDWLRQDO)LQDQFLDO5HSRUWLQJ6WDQGDUGVJLYHDWUXHDQG IDLUYLHZRIWKHVWDWHRIDIIDLUVRIWKH%DQNDVDW'HFHPEHUDQGRILWVUHVXOWVRIRSHUDWLRQVDQGFDVKÀRZV IRUWKH\HDUWKHQHQGHGDQGFRPSO\ZLWKWKHSURYLVLRQVRIWKH%DQNRI-DPDLFD$FW $SULO KPMG Peat Marwick, a Jamaican Partnership, Raphael E. Gordon Caryl A. Fenton Elizabeth A. Jones is a member of KPMG International, Patrick A. Chin Patricia 0. Dailey-Smith Linroy J. MarshalI a Swiss nonoperating association. R. Tarun Handa Cynthia I. Lawrence 122i Annual Report 2004 %DODQFH6KHHW December 31, 2004 1RWHV 2004 2003 -¶ -¶ $66(76 Foreign assets 1RWHVDQGFRLQV &DVKUHVRXUFHV ,QWHUHVWLQIXQGVPDQDJHGE\DJHQWV ,QYHVWPHQWV ,QWHUQDWLRQDO0RQHWDU\)XQG +ROGLQJRI6SHFLDO'UDZLQJ5LJKWV Local assets 1RWHVDQGFRLQV ,QYHVWPHQWV ,QWHUQDWLRQDO0RQHWDU\)XQG4XRWD 6XEVFULSWLRQ ,QYHVWPHQWSURSHUW\ ,QYHVWPHQWVLQ¿QDQFLDOLQVWLWXWLRQV 'XHIURP*RYHUQPHQWDQG*RYHUQPHQW $JHQFLHV 3URSHUW\SODQWDQGHTXLSPHQW (PSOR\HHEHQH¿WV 2WKHU 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKH¿QDQFLDOVWDWHPHQWV 123ii Bank of Jamaica %DODQFH6KHHW FRQW¶G December 31, 2004 1RWHV 2004 2003 -¶ -¶ /,$%,/,7,(6&$3,7$/$1'5(6(59(6 Liabilities 1RWHVDQGFRLQVLQFLUFXODWLRQ 'HSRVLWVDQGRWKHUGHPDQGOLDELOLWLHV 2SHQPDUNHWOLDELOLWLHV ,QWHUQDWLRQDO0RQHWDU\)XQG $OORFDWLRQRI6SHFLDO'UDZLQJ5LJKWV )RUHLJQOLDELOLWLHV (PSOR\HHREOLJDWLRQV 2WKHU Capital and reserves 6KDUHFDSLWDO *HQHUDOUHVHUYHIXQG 6SHFLDOVWDELOLVDWLRQDFFRXQW 2WKHUUHVHUYHV 7KH¿QDQFLDOVWDWHPHQWVRQSDJHVWRZHUHDSSURYHGE\WKH%RDUGRI'LUHFWRUVRQ$SULODQGVLJQHG RQLWVEHKDOIE\ Governor 'HULFN0LOWRQ/DWLEHDXGLHUH 'LYLVLRQ&KLHI)LQDQFHDQG7HFKQRORJ\ +HUEHUW$+\OWRQ 'LUHFWRU$FFRXQWLQJ6HUYLFHV'HSDUWPHQW $QJHOD()RRWH 5HFODVVL¿HGWRFRQIRUPWRSUHVHQWDWLRQ 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKH¿QDQFLDOVWDWHPHQWV Final Accounts for Year ended 31 December 2004 124iii Annual Report 2004 6WDWHPHQWRI,QFRPHDQG([SHQVHV Year ended December 31, 2004 1RWHV 2004 2003 -¶ -¶ 2SHUDWLQJLQFRPH ,QWHUHVW )RUHLJQH[FKDQJHJDLQQHW 2WKHU Total 2SHUDWLQJH[SHQVHV ,QWHUHVW 6DODULHVDQGRWKHUVWDIIFRVWV &XUUHQF\H[SHQVHV 3URSHUW\H[SHQVHVLQFOXGLQJGHSUHFLDWLRQ 2WKHURSHUDWLQJH[SHQVHV 7RWDO 1HWRSHUDWLQJ ORVV SUR¿W 2WKHUJDLQV ORVVHV 3HQVLRQPHGLFDODQGOLIHLQVXUDQFH F ,PSDLUPHQWSURYLVLRQQHW /RVV JDLQRQUHPHDVXUHPHQWRIVWDIIORDQV DQGSURPLVVRU\QRWH /RVVRQUHYDOXDWLRQRIVHFXULWLHV *DLQRQGLVSRVDORISURSHUW\SODQWDQGHTXLSPHQW *DLQRQGLVSRVDORILQYHVWPHQWSURSHUW\ &KDQJHLQYDOXHRILQYHVWPHQWSURSHUW\ Expenditure on behalf of Government RI-DPDLFDQRWUHLPEXUVHG 1HW ORVV SUR¿WIRUWKH\HDU Transferred to pension equalisation reserve 22(c) ( 688,800) ( 73,900) Transferred to general reserve fund ( 5HFODVVL¿HGWRFRQIRUPWRSUHVHQWDWLRQ 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKH¿QDQFLDOVWDWHPHQWV Final Accounts for Year ended 31 December 2004 iv Bank of Jamaica 6WDWHPHQWRI&KDQJHVLQ(TXLW\ Year ended December 31, 2004 *HQHUDO6SHFLDO 6KDUH UHVHUYH VWDELOLVDWLRQ 2WKHU capital fund account reserves Total -¶ -¶ -¶ -¶ -¶ 1RWH 1RWH 1RWH 1RWH %DODQFHVDW'HFHPEHU 1HWSUR¿WIRUWKH\HDU 6XUSOXVDULVLQJRQUHYDOXDWLRQRI SURSHUW\SODQWDQGHTXLSPHQW 7UDQVIHURIVXUSOXVRQGH¿QHG EHQH¿WSHQVLRQVFKHPH Change in fair value of available- IRUVDOHVHFXULWLHV 7UDQVIHUIURPFRLQVLQFLUFXODWLRQ 1HWSUR¿WGXHWRFRQVROLGDWHGIXQG - ( - - ( %DODQFHVDW'HFHPEHU 1HWORVVIRUWKH\HDU 7UDQVIHURIVXUSOXVRQGH¿QHG EHQH¿WSHQVLRQVFKHPH Change in fair value of available- IRUVDOHVHFXULWLHV 7UDQVIHUIURPFRLQVLQFLUFXODWLRQ 1HWORVVGXHIURPFRQVROLGDWHG IXQG QRWH - - - %DODQFHVDW'HFHPEHU 7RWDOUHFRJQLVHGORVVHV- JDLQV- 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKH¿QDQFLDOVWDWHPHQWV Final Accounts for Year ended 31 December 2004 126v Annual Report 2004 6WDWHPHQWRI&DVK)ORZV Year ended December 31, 2004 2004 2003 -¶ -¶ &DVKSURYLGHGE\RSHUDWLQJDFWLYLWLHV 1HW ORVV SUR¿WIRUWKH\HDU $GMXVWPHQWVWRUHFRQFLOHQHW ORVV SUR¿WIRUWKH\HDUWR QHWFDVK XVHG SURYLGHGE\RSHUDWLQJDFWLYLWLHV 'HSUHFLDWLRQ *DLQRQGLVSRVDORISURSHUW\SODQWDQGHTXLSPHQW *DLQRQGLVSRVDORILQYHVWPHQWSURSHUW\ (PSOR\HHEHQH¿WVQHW &KDQJHLQIDLUYDOXHRILQYHVWPHQWSURSHUW\ 8QUHDOLVHGH[FKDQJHJDLQRQ,QWHUQDWLRQDO 0RQHWDU\)XQG4XRWDVXEVFULSWLRQ 8QUHDOLVHGH[FKDQJHORVVRQ,QWHUQDWLRQDO 0RQHWDU\)XQG$OORFDWLRQRI6'5¶V 1HWFDVK XVHG SURYLGHGE\RSHUDWLQJDFWLYLWLHV &DVKÀRZVIURPLQYHVWLQJDFWLYLWLHV ,QYHVWPHQWLQ)LQDQFLDO,QVWLWXWLRQV ,QWHUQDWLRQDO0RQHWDU\)XQG +ROGLQJRI6SHFLDO'UDZLQJ5LJKWV ,QWHUHVWLQIXQGVPDQDJHGE\DJHQWV )RUHLJQFXUUHQF\GHQRPLQDWHGLQYHVWPHQWV /RFDOFXUUHQF\GHQRPLQDWHGLQYHVWPHQWV 3URFHHGVRIGLVSRVDORILQYHVWPHQWSURSHUW\ 'XHIURP*RYHUQPHQWDQG*RYHUQPHQW$JHQFLHV $GGLWLRQVWRSURSHUW\SODQWDQGHTXLSPHQW $GGLWLRQVWRLQYHVWPHQWSURSHUW\ 3URFHHGVRIGLVSRVDORISURSHUW\SODQWDQGHTXLSPHQW 2WKHUDVVHWV 1HWFDVKXVHGE\LQYHVWLQJDFWLYLWLHV &DVKÀRZVIURP¿QDQFLQJDFWLYLWLHV 1RWHVDQGFRLQVLQFLUFXODWLRQ 'HSRVLWVDQGRWKHUGHPDQGOLDELOLWLHV 2SHQPDUNHWOLDELOLWLHV )RUHLJQOLDELOLWLHV 2WKHUOLDELOLWLHV 1HWFDVKSURYLGHGE\¿QDQFLQJDFWLYLWLHV 1HWLQFUHDVHLQFDVKUHVRXUFHV Cash resources at beginning of year Cash resources at end of year &DVKUHVRXUFHVDWHQGRI\HDUFRPSULVH )RUHLJQQRWHVDQGFRLQV )RUHLJQFXUUHQF\FDVKUHVRXUFHV Local notes and coins 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKH¿QDQFLDOVWDWHPHQWV Final Accounts for Year ended 31 December 2004 vi Bank of Jamaica 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV December 31, 2004 1 ,GHQWL¿FDWLRQ %DQNRI-DPDLFD KHUHDIWHU³WKH%DQN´ ZDVHVWDEOLVKHGXQGHUWKH%DQNRI-DPDLFD$FW KHUHDIWHU³WKH$FW´ 7KH $FWZDVDPHQGHGHIIHFWLYH'HFHPEHU>VHHQRWH I @ DQGRQ'HFHPEHUWRYDOLGDWHDQGFRQ¿UPDFWV 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of income and expenses over the expected average remaining working lives of the employees SDUWLFLSDWLQJLQWKHSODQ2WKHUZLVHWKHDFWXDULDOJDLQRUORVVLVQRWUHFRJQLVHG Final Accounts for Year ended 31 December 2004 132xi Annual Report 2004 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV FRQW¶G December 31, 2004 %DVLVRISUHSDUDWLRQDQGVLJQL¿FDQWDFFRXQWLQJSROLFLHV FRQW¶G J (PSOR\HHEHQH¿WV FRQW¶G :KHUHWKHFDOFXODWLRQUHVXOWVLQDEHQH¿WWRWKH%DQNWKHUHFRJQLVHGDVVHWLVOLPLWHGWRWKHQHWWRWDORIDQ\ unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions WRWKHSODQ K 6WDWXWRU\WUDQVIHURISUR¿WVDQGORVVHV 6HFWLRQ RIWKH$FWSURYLGHVIRUHDFK¿QDQFLDO\HDU¶VQHWLQFRPHWREHFUHGLWHGRUQHWORVVFKDUJHGWRWKH *HQHUDO5HVHUYH)XQGDQGIRUWKHEDODQFHRQWKH*HQHUDO5HVHUYH)XQGLQH[FHVVRI¿YHWLPHVWKH%DQN¶V DXWKRULVHGVKDUHFDSLWDOWREHWUDQVIHUUHGWRWKH&RQVROLGDWHG)XQG/LNHZLVHDQ\ORVVHVQRWFRYHUHGE\UHVHUYHV DUHUHTXLUHGE\WKH$FWWREHIXQGHGE\*RYHUQPHQWRXWRIWKH&RQVROLGDWHG)XQG L ,QYHVWPHQWSURSHUW\ ,QYHVWPHQWSURSHUW\LVVWDWHGDWIDLUYDOXHGHWHUPLQHGDQQXDOO\E\DQLQGHSHQGHQWUHJLVWHUHGYDOXHU)DLUYDOXH LVEDVHGRQFXUUHQWSULFHVLQDQDFWLYHPDUNHWIRUVLPLODUSURSHUWLHVLQWKHVDPHORFDWLRQDQGFRQGLWLRQ$Q\JDLQ RUORVVDULVLQJIURPDFKDQJHLQIDLUYDOXHLVUHFRJQLVHGLQWKHVWDWHPHQWRILQFRPHDQGH[SHQVHV,QFDUU\LQJ RXWWKHLUDXGLWWKHDXGLWRUVUHOLHGRQWKHYDOXDWRUV¶UHSRUW M ,PSDLUPHQW The carrying amounts of the Bank’s assets are reviewed at each balance sheet date to determine whether there is DQ\LQGLFDWLRQRILPSDLUPHQW,IDQ\VXFKLQGLFDWLRQH[LVWVWKHDVVHW¶VUHFRYHUDEOHDPRXQWLVHVWLPDWHGDWHDFK EDODQFHVKHHWGDWH$QLPSDLUPHQWORVVLVUHFRJQLVHGZKHQHYHUWKHFDUU\LQJDPRXQWRIDQDVVHWRULWVFDVK JHQHUDWLQJXQLWH[FHHGVLWVUHFRYHUDEOHDPRXQW,PSDLUPHQWORVVHVDUHUHFRJQLVHGLQWKHVWDWHPHQWRIUHYHQXH DQGH[SHQVHV L &DOFXODWLRQRIUHFRYHUDEOHDPRXQW The recoverable amount of loans receivable is determined as indicated in accounting policy note F LL The recoverable amount of the Bank’s investment in originated securities and other assets is calculated as WKHSUHVHQWYDOXHRIH[SHFWHGIXWXUHFDVKÀRZVGLVFRXQWHGDWWKHRULJLQDOHIIHFWLYHLQWHUHVWUDWHLQKHUHQW LQWKHDVVHW7KHUHFRYHUDEOHDPRXQWRIRWKHUDVVHWVLVWKHJUHDWHURIWKHLUQHWVHOOLQJSULFHDQGYDOXHLQ XVH ,QDVVHVVLQJYDOXHLQXVHWKHHVWLPDWHGIXWXUHFDVKÀRZVDUHGLVFRXQWHGWRWKHLUSUHVHQWYDOXHXVLQJD SUHWD[GLVFRXQWUDWHWKDWUHÀHFWVFXUUHQWPDUNHWDVVHVVPHQWVRIWKHWLPHYDOXHRIPRQH\DQGWKHULVNV VSHFL¿FWRWKHDVVHW )RUDQDVVHWWKDWGRHVQRWJHQHUDWHODUJHO\LQGHSHQGHQWFDVKLQÀRZVWKHUHFRYHUDEOHDPRXQWLVGHWHUPLQHG IRUWKHFDVKJHQHUDWLQJXQLWWRZKLFKWKHDVVHWEHORQJV LL 5HYHUVDOVRILPSDLUPHQW ,QUHVSHFWRIRWKHUDVVHWVDQLPSDLUPHQWORVVLVUHYHUVHGLIWKHUHKDVEHHQDFKDQJHLQWKHHVWLPDWHVXVHG WRGHWHUPLQHWKHUHFRYHUDEOHDPRXQW Final Accounts for Year ended 31 December 2004 133xii Bank of Jamaica 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV FRQW¶G December 31, 2004 %DVLVRISUHSDUDWLRQDQGVLJQL¿FDQWDFFRXQWLQJSROLFLHV FRQW¶G M ,PSDLUPHQW FRQW¶G LL 5HYHUVDOVRILPSDLUPHQW FRQW¶G $QLPSDLUPHQWORVVLVUHYHUVHGRQO\WRWKHH[WHQWWKDWWKHDVVHW¶VFDUU\LQJDPRXQWGRHVQRWH[FHHGWKH FDUU\LQJDPRXQWWKDWZRXOGKDYHEHHQGHWHUPLQHGLIQRLPSDLUPHQWORVVKDGEHHQUHFRJQLVHG Cash resources 2004 2003 -¶ -¶ &XUUHQWDFFRXQWVDQGPRQH\DWFDOOZLWKIRUHLJQEDQNV Current accounts with local banks Foreign currency denominated investments 2004 2003 -¶ -¶ 2ULJLQDWHGVHFXULWLHV 86*RYHUQPHQWERQGV $YDLODEOHIRUVDOHVHFXULWLHV 86*RYHUQPHQWERQGV Barbados Government bond 6KRUWWHUPGHSRVLWVZLWKIRUHLJQEDQNV Local currency denominated investments 2004 2003 -¶ -¶ 2ULJLQDWHGVHFXULWLHV -DPDLFD*RYHUQPHQW6HFXULWLHV /RFDOUHJLVWHUHGVWRFN %RQGV 'HEHQWXUHV $YDLODEOHIRUVDOHVHFXULWLHV -DPDLFD*RYHUQPHQW6HFXULWLHV /RFDOUHJLVWHUHGVWRFN 7UHDVXU\ELOOV %RQGV 'HEHQWXUHV Final Accounts for Year ended 31 December 2004 134xiii Annual Report 2004 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV FRQW¶G December 31, 2004 ,QWHUQDWLRQDO0RQHWDU\)XQG±4XRWD6XEVFULSWLRQ 7KLVUHSUHVHQWVWKHSRUWLRQRI-DPDLFD¶VIHHIRUPHPEHUVKLSRIWKH,QWHUQDWLRQDO0RQHWDU\)XQG ,0) EDVHGRQLWV TXRWDZKLFKZDVSDLGE\WKH%DQN WKHRWKHUSRUWLRQKDYLQJEHHQVXEVFULEHGE\WKH*RYHUQPHQWRI-DPDLFD 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REOLJDWLRQUHFRJQLVHGLQWKHEDODQFHVKHHW $VVHW 2EOLJDWLRQ 2004 2003 2004 2003 -¶ -¶ -¶ -¶ 1HW DVVHWV REOLJDWLRQVDW-DQXDU\ &RQWULEXWLRQV ,QFRPH H[SHQVHUHFRJQLVHGLQWKH statement of income and expenses ( 1HW DVVHWV REOLJDWLRQVDWHQGRI\HDU F ,QFRPH H[SHQVHUHFRJQLVHGLQWKHVWDWHPHQWRILQFRPHDQGH[SHQVHV $VVHW 2EOLJDWLRQ 2004 2003 2004 2003 -¶ -¶ -¶ -¶ &XUUHQWVHUYLFHFRVWV ,QWHUHVWRQREOLJDWLRQ ([SHFWHGUHWXUQRQSODQDVVHWV 1HWDFWXDULDO JDLQV ORVVHVUHFRJQLVHG &KDQJHLQGLVDOORZHGDVVHWV Past service costs - - Total included in staff costs ( $FWXDOUHWXUQRQSODQDVVHWV G 3ULQFLSDODFWXDULDODVVXPSWLRQVDWWKHEDODQFHVKHHWGDWH H[SUHVVHGDVZHLJKWHGDYHUDJHV 2004 2003 'LVFRXQWUDWHDW-DQXDU\ ([SHFWHGUHWXUQRQSODQDVVHWVDW-DQXDU\ )XWXUHVDODU\LQFUHDVHV )XWXUHSHQVLRQLQFUHDVHV 0HGLFDOFODLPVJURZWK H 7KH%DQNJUDQWHGLQFUHDVHVWRSHQVLRQHUVDVDVXSSOHPHQWWRWKHSHQVLRQVSDLGE\WKHVFKHPH$QDFWXDULDO valuation disclosed that for the scheme to take over these supplemental payments currently being paid by 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RIWKH$FWSURYLGHVWKDWWKH%DQNVKDOOHVWDEOLVKDQGPDLQWDLQD*HQHUDO5HVHUYH)XQG D WRZKLFKDWWKHHQGRIHDFK¿QDQFLDO\HDUWKHQHWLQFRPHIRUWKDW\HDUVKDOOEHWUDQVIHUUHGRUWKHQHWORVVHV charged; E IURPZKLFKVKDOOEHSDLGWRWKH&RQVROLGDWHG)XQGWKHDPRXQWE\ZKLFKDWWKHHQGRIWKH¿QDQFLDO\HDUWKH EDODQFHWKHUHRQH[FHHGV¿YHWLPHVWKH%DQN¶VDXWKRULVHGVKDUHFDSLWDO F LQWRZKLFKVKRXOGEHSDLGIURPWKH&RQVROLGDWHG)XQGDWWKHHQGRIWKH¿QDQFLDO\HDUWKHDPRXQWE\ZKLFKWKH %DQN¶VQHWORVVH[FHHGVWKHEDODQFHLQWKH*HQHUDO5HVHUYH)XQG 6SHFLDOVWDELOLVDWLRQDFFRXQW 7KHVSHFLDOVWDELOLVDWLRQDFFRXQWLVPDLQWDLQHGDWRIWKHFRLQVLQFLUFXODWLRQDVDUHVHUYHDJDLQVWFRLQVWKDWDUH XQOLNHO\WREHUHGHHPHG 2WKHUUHVHUYHV 7KLVUHSUHVHQWVWKHIROORZLQJ 2004 2003 -¶ -¶ 6HFXULWLHVUHYDOXDWLRQUHVHUYH>VHH D @ 3URSHUW\UHYDOXDWLRQUHVHUYH>VHH E @ 3HQVLRQHTXDOLVDWLRQUHVHUYH>VHH F @ D 7KLVUHSUHVHQWVWKHXQUHDOLVHGJDLQVORVVHVRQWKHUHYDOXDWLRQRIDYDLODEOHIRUVDOHLQYHVWPHQWV E 7KHSURSHUW\UHYDOXDWLRQUHVHUYHUHSUHVHQWVWKHVXUSOXVDULVLQJRQWKHUHYDOXDWLRQRIFHUWDLQIUHHKROGSURSHUWLHV VHHQRWH F 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this is represented substantially by the carrying amount of ¿QDQFLDODVVHWVVKRZQRQWKHEDODQFHVKHHW LY 0DUNHWULVN 0DUNHWULVNLVWKHULVNWKDWWKHYDOXHRID¿QDQFLDOLQVWUXPHQWZLOOÀXFWXDWHDVDUHVXOWRIFKDQJHVLQ PDUNHWSULFHVZKHWKHUWKRVHFKDQJHVDUHFDXVHGE\IDFWRUVVSHFL¿FWRWKHLQGLYLGXDOVHFXULW\LWVLVVXHURU IDFWRUVDIIHFWLQJDOOVHFXULWLHVWUDGHGLQWKHPDUNHW 7KH%DQNPDQDJHVPDUNHWULVNRQLWVIRUHLJQDVVHWSRUWIROLRWKURXJK ,WVLQYHVWPHQWSROLF\ZKLFKSUHVFULEHVWKHTXDOLW\RIWKHLVVXHUDQGOLPLWVLQYHVWPHQWVWRVSHFL¿F IRUHLJQJRYHUQPHQWVHFXULWLHVWKDWDUHGHHPHGWREHYLUWXDOO\ULVNIUHH ,WVGLYHUVL¿FDWLRQRIWKHSRUWIROLRLQWRYDULRXVLQVWUXPHQWVZKLOHOLPLWLQJWKHPD[LPXPSHUPLWWHG H[SRVXUHWRDQ\RQHVHFXULW\RULVVXHU ,WVSROLF\RIKROGLQJVHFXULWLHVWRPDWXULW\ZKLFKLQHVVHQFHHOLPLQDWHVWKHSRVVLELOLW\RIORVVDULVLQJ IURPÀXFWXDWLRQVLQPDUNHWSULFH Final Accounts for Year ended 31 December 2004 xxvi Bank of Jamaica 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV FRQW¶G December 31, 2004 Financial instruments FRQW¶G E )LQDQFLDOLQVWUXPHQWULVN FRQW¶G LY 0DUNHWULVN FRQW¶G Market risk on the Bank’s local asset portfolio of investments is minimised by restricting investments to VHFXULWLHVLVVXHGRUJXDUDQWHHGE\WKH*RYHUQPHQWRI-DPDLFD Y /LTXLGLW\ULVN /LTXLGLW\ ULVN DOVR UHIHUUHG WR DV IXQGLQJ ULVN LV WKH ULVN WKDW WKH %DQN ZLOO HQFRXQWHU GLI¿FXOW\ LQ FRQYHUWLQJLWVVHFXULWLHVWRFDVKDWRUFORVHWRLWVIDLUYDOXHRULQUDLVLQJIXQGVWRPHHWLWVFRPPLWPHQWV 3UXGHQWOLTXLGLW\PDQDJHPHQWLPSOLHVPDLQWDLQLQJVXI¿FLHQWFDVKDQGPDUNHWDEOHVHFXULWLHVDQGHQVXULQJ the availability of funding through an adequate amount of committed standby credit facilities to meet FRPPLWPHQWV 7KH%DQN¶VH[SRVXUHWROLTXLGLW\ULVNWRPHHWIRUHLJQOLDELOLWLHVDVDQLQVWLWXWLRQLVOLPLWHGGXHWRWKH PLQLPDODPRXQWRZHGWRRYHUVHDVFUHGLWRUVOHQGHUV0DQDJHPHQWRIOLTXLGLW\ULVNUHODWHVSULPDULO\WR the availability of liquid foreign resources to sell to the Government of Jamaica and its agencies to repay WKHLUFUHGLWRUVDQGOHQGHUV7KH%DQNPDQDJHVWKLVULVNWKURXJKDFRPELQDWLRQRI %XGJHWDU\SURFHGXUHVWRLGHQWLI\WKHWLPLQJRI*RYHUQPHQWIRUHLJQSD\PHQWV 6FKHGXOLQJWKHPDWXULW\RIIRUHLJQGHSRVLWVWRFRLQFLGHZLWKWKHGHPDQGVRI*RYHUQPHQWDQGLWV $JHQFLHV Maintaining a portion of its foreign assets in cash or near cash as precautionary funds to meet XQIRUHVHHQGHPDQGV 7KH %DQN OLNH DOO FHQWUDO EDQNV KDV QR UHDO OLTXLGLW\ ULVN LQ UHODWLRQ WR LWV GRPHVWLF ¿QDQFLDO REOLJDWLRQV YL &DVKÀRZULVN &DVKÀRZULVNLVWKHULVNWKDWIXWXUHFDVKÀRZVDVVRFLDWHGZLWKDPRQHWDU\¿QDQFLDOLQVWUXPHQWZLOO ÀXFWXDWHLQDPRXQW 7KH%DQNPDQDJHVWKLVULVNWKURXJKEXGJHWDU\PHDVXUHVHQVXULQJDVIDUDVSRVVLEOHWKDW¿QDQFLDODVVHWV DQGOLDELOLWLHVDUHPDWFKHGWRPLWLJDWHDQ\VLJQL¿FDQWDGYHUVHFDVKÀRZV Final Accounts for Year ended 31 December 2004 xxvii148