Call for regional response to financial threats

KINGSTON, Jamaica: Regional financial regulators and policy makers have been challenged to seek to resolve problems related to cooperation on a response to issues related to banking enterprises operating in more than one jurisdiction.

Governor of the Bank of Jamaica (BOJ), Bryan Wynter, says that authorities must give urgent priority to the development of a regional crisis management plan for regulators and policy makers.

He said the potential for problems in one jurisdiction impacting developments in another regional market is now a matter of critical concern.

Wynter said the central banks of CARICOM have initiated a regional crisis management plan as a response to crisis situations in banking enterprises operating in more than one jurisdiction in the region.

“The plan is intended to address crises that involve liquidity situations, or the ensuing insolvency of, at least, one member of a banking group,” said Wynter while addressing a recent conference on bank insolvency in the Caribbean.

“It is also proposed that the plan will address principles underlying preparedness during normal times, systemic risk assessments, crisis identification, how and when to invoke procedures and the adoption of region-wide communication strategies,” Wynter said.

However, Wynter said there have been several challenges to making the plan a reality.

Among these are how the cost of any remedial action to stabilize the financial sectors in participating countries be shared in cases where there is or may be spill over contagion between jurisdictions; as well as legislative issues.

“How shall we overcome the legislative and policy hindrances, such as exchange controls, that would restrict or inhibit the flow of funds to a distressed centre in the event of either a private sector crisis resolution or a collective public sector bail-out?

“How will we treat the variations in the different legislative and supervisory arrangements in place in member jurisdictions that may impact on the ability of jurisdictions to fully participate in the regional plan?” said Wynter.

In addition, Wynter said it is vital that authorities continually seek to ensure that the oversight framework allows for the development of resilient financial systems with necessary provisions for the orderly exit of intermediaries whenever it becomes necessary, with minimum disruption to depositors and the local economy.

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