Jamaica’s financial system remained resilient despite the sharp economic contraction caused by Hurricane Melissa and geopolitical tensions.
That’s according to the latest report from the Bank of Jamaica, BOJ’s Financial Policy Committee released on Monday.
But it warns that significant risks remain in the near term.
Chevon Campbell, tells us more.
The statement from the Central Bank’s Financial Policy Committee follows its meeting on July 7.
It notes that the domestic economy shrank by 4.1 percent in the March 2026 quarter, reflecting the effects of the hurricane last October.
Despite that, it says key prudential measures across the financial sector stayed within their prescribed thresholds.
The Committee attributes that resilience to the sector’s stable financial position, sound regulatory oversight, and broadly stable macroeconomic fundamentals.
Over the review period, it says inflation remained within the BOJ’s target range of four to six percent, while the policy interest rate was cut to 5.50 percent.
Exchange rate volatility also moderated, with the dollar depreciating by just 0.2 percent year-on-year at the end of March.
And the Jamaica Stock Exchange Main Index rose by 8.8 percent during the quarter, reversing the declines of the previous three months.
Looking ahead, the Committee says geopolitical tensions in the Middle East may ease following the peace deal announced between the United States and Iran.
But it cautions that global uncertainty could persist as a source of risk to domestic financial stability conditions that may continue to dampen economic growth and weaken borrowers’ capacity to repay, particularly while the recovery from Melissa is still under way.
Insurance companies, it adds, may face upward pressure on costs in the wake of the hurricane, with possible implications for affordability and for insurers’ profitability.
The committee also flags uncertainty over the pace of monetary policy easing amid continuing inflationary pressures and warns that financial market volatility could drive higher valuation losses across institutions.
Against that background, stress tests were carried out to assess how well financial institutions could withstand credit, liquidity and market risk shocks.
The committee says the results indicate that sub-sectors of the financial system generally hold sufficient capital to weather macro-financial stress, but regulators and institutions will need to remain attentive to institution-specific market risk exposures.
The committee says supervisors remain vigilant in monitoring risks and are committed to strengthening risk mitigation frameworks.
It highlights ongoing improvements in important regulations, such as the Twin Peaks model, Basel Three implementation, and steps to tackle cyber and climate-related risks, which are all expected to make the system better at handling unexpected shosk.
