Bank of Jamaica Current Priorities in Banking Supervision 2025

BANK OF JAMAICA CURRENT PRIORITIES IN BANKING SUPERVISION

2025

Box 2: Current Priorities in Banking Supervision Introduction In 2025, Bank of Jamaica continued to strengthen its regulatory and supervisory framework in alignment with international best practices. Review and update of Standards of Sound Practice A. Updated Standard of Sound Practice for Effective Corporate Governance of DTIs and FHCs In November 2025, the Bank finalised the revised Standard of Sound Practice for Effective Corporate Governance of deposit-taking institutions (DTIs) and financial holding companies (FHCs). This Standard outlines the Bank’s principle-based governance expectations and highlights the respective responsibilities of Boards of Directors and senior management in promoting sound risk governance, effective group oversight and institutional transparency. DTIs and FHCs are required to ensure that their governance arrangements align with the Standard's requirements. In addition, they are encouraged to continuously strengthen their internal frameworks in line with evolving international best practice. The Standard adopts a proportional approach, tailoring governance expectations to the regulated entity's size, complexity and risk profile. Compliance with the Standard will be a key component of the Bank’s supervisory assessments. The failure of regulated entities to comply with the Standard may result in supervisory action, including the issuance of directives or restrictions. B. Minimum Operating Standards for the Resolution of Customer Complaints During 2025, the Bank made significant progress in developing Minimum Operating Standards for the Resolution of Customer Complaints. The Standard forms part of a broader framework to strengthen market conduct, consumer protection and financial sector resilience under the forthcoming Twin Peaks regulatory framework. The proposed Standard will establish uniform requirements for all DTIs to ensure that customer complaints are addressed fairly, transparently and promptly, supported by sound governance and accountability mechanisms. At end-2025, the internal review process of the document was completed and scheduled for issuance as a consultation paper to industry stakeholders in the first quarter of 2026. Prudential Standards/Consultation Papers Consultation Paper on Revised Standard of Sound Practice on the Liquidity Coverage Ratio In March 2025, the Bank issued a consultation paper proposing updates to the Standard of Sound Practice on the Liquidity Coverage Ratio (LCR) by introducing a high-quality liquid asset (HQLA) usability framework.

Under the proposed framework, DTIs will be required to maintain a newly-established early warning threshold (EWT) of 120.0 per cent. The threshold will require DTIs to maintain a buffer of HQLA above the regulatory minimum LCR of 100.0 per cent, thereby enhancing liquidity resilience during periods of financial stress. Where a DTI’s LCR position falls to, or below, the 120.0 per cent and115.0 per cent thresholds, progressively heightened supervisory engagement by the Bank would be triggered. These actions may include enhanced monitoring, restrictions on discretionary payments and other measures deemed appropriate to safeguard liquidity resilience. Consultation Paper on the Prudential Framework for Consolidated Capital Adequacy During the year, the Bank of Jamaica progressed work on developing a consultation paper on a prudential framework for consolidated capital adequacy. This initiative forms part of the Bank’s ongoing efforts to strengthen consolidated supervision and enhance the oversight of financial groups operating in Jamaica. In advancing this initiative, the Bank has been considering appropriate consolidation approaches that can be applied consistently across FHCs and group structures in the domestic financial system. The consultation paper is expected to set out proposals for capital requirements at both the FHC and consolidated group levels. These proposals are being developed to support the effective functioning of the parent entity, promote adequate capitalisation across financial groups and enhance the resilience of the financial system, taking into account the characteristics of financial groups in Jamaica. Upon completion, the consultation paper will be issued for stakeholder feedback. Key Supervisory Projects A. Electronic Know Your Customer/Customer Due Diligence (e-KYC/CDD) Framework During the review period, the development of a national e-KYC/CDD framework remained a key supervisory and policy priority for BOJ. This is in the context of the framework’s strategic importance to financial system efficiency, competition, financial inclusion and the modernisation of supervisory expectations around customer due diligence. The e-KYC/CDD project is designed to support a secure, standardised and interoperable digital onboarding environment for DTIs and other regulated financial service providers. The initiative seeks to address long-standing structural frictions in customer onboarding and ongoing due diligence processes, while strengthening compliance outcomes under the anti-money laundering and counter-terrorism financing (AML/CFT) framework. Importantly, the proposed solution is designed as a consent-based intermediary that will facilitate the verification of customer identity attributes from authoritative public-sector data sources, without the centralised storage of customer data. Significant progress was made, during 2025, across the project’s governance, legal, technical and policy workstreams. During the March 2025 quarter, the Bank completed a comprehensive legal and legislative assessment, including a comparative review of selected international jurisdictions, to confirm the feasibility of the proposed operating model within Jamaica’s existing legal framework. In parallel, a detailed assessment of existing onboarding and CDD practices

across the banking system was undertaken, culminating in the definition of a target-state operating model for e-KYC implementation. Stakeholder engagement remained a central feature of the project’s development. Following the publication of the World Bank–supported consultation paper in 2024, the Bank issued the associated frequently asked questions in March 2025 to clarify policy intent, scope and implementation considerations. Building on this foundation, an e-KYC Operational Model Consultation Paper was published in June 2025, outlining the proposed governance structure, risk allocation, data-access principles and supervisory expectations. Feedback received from regulated institutions and digital service providers informed subsequent refinements, with additional clarifications issued later in the year. From a supervisory perspective, particular emphasis was placed on governance, operational resilience, data protection and third-party risk considerations. During 2025, the Bank approved the key governance-related risks associated with the proposed framework, ensuring alignment with AML/CFT obligations of Licensees, developments in the payments and cleaning and settlement systems and emerging expectations relating to outsourcing and reliance on third-party service providers. The project progressed to the procurement phase during the review year. Specifically, a Request for Proposal for the provision of the e-KYC solution was approved and published in late 2025, supported by extensive market engagement and strong international interest. The procurement process was structured to ensure transparency, competitiveness and alignment with the Bank’s functional, security and supervisory requirements. Phase I of the technical engagement was completed during the year, and additional specialist support was engaged to assist with evaluation and selection activities. For 2026, further work will focus on completing the procurement process, finalising the policy framework and preparing for phased implementation and supervisory integration. Key Developments – National AML/CFT/CPF Programme A. Jamaica’s National Risk Assessment (NRA3) In 2025, the Bank, in collaboration with the National Anti-Money Laundering Committee (NAMLC), advanced efforts to finalize Jamaica’s third iteration of the National Risk Assessment (NRA3), representing an update to the second assessment published in August 2021. NRA3 constitutes a significant policy milestone, delivering an updated, evidence-based evaluation of Jamaica’s money laundering (ML), terrorist financing (TF), and proliferation financing (PF) risks. The assessment incorporated enhanced quantitative and qualitative inputs to evaluate the country’s capacity to mitigate financial crime risks and identify sector-specific vulnerabilities. This included analysis of financial intelligence trends, supervisory effectiveness and enforcement outcomes, areas of reduced risk, and emerging ML/TF/PF threats, including technology-enabled financial crimes. The process was underpinned by strengthened inter-agency coordination through NAMLC, facilitating a harmonized national approach and broader cross-sectoral perspectives on risk

exposure. Contributions from a cross-section of private sector stakeholders further enriched the assessment. Key recommended actions arising from NRA3 will inform adjustments to national AML/CFT/CPF policies and programs and guide risk-based supervisory engagement across sectors.

B. CFATF 5th Round Mutual Evaluation (MEVAL) Preparations for the Caribbean Financial Action Task Force (CFATF) 5th Round of Mutual Evaluations advanced in January 2025, coordinated through the Bank via the NAMLC Secretariat. The mutual evaluation will assess Jamaica’s technical compliance and effectiveness in addressing money laundering, terrorist financing, and proliferation financing risks, with the final report expected in summer 2027. Preparatory efforts commenced with targeted training for NAMLC agencies and key private sector stakeholders, supported by ongoing inter-agency coordination. In 2025, Jamaica’s reform progress was further recognized by the Financial Action Task Force (FATF) through an invitation to participate, under its own flag, in the FATF Guest Initiative for members of FATF-Style Regional Bodies. This engagement provided valuable insight into global policy deliberations and supervisory expectations, reinforcing Jamaica’s standing in the international AML/CFT/CPF community. The programme will advance in 2026, and the priority will remain on strengthening national coordination and evidencing sustained supervisory effectiveness. The Bank’s focus is not only on achieving a strong Mutual Evaluation outcome, but on ensuring a sustainable, risk-aligned AML/CFT/CPF framework that safeguards the integrity and stability of Jamaica’s financial system.