Tue | Jul 17, 2018

Banks assessing likely impact of new Banking Code

Published:Friday | October 14, 2016 | 12:00 AMMcPherse Thompson
George Roper, committee member of the Jamaica Bankers Association.
Brian Wynter, governor of the Bank of Jamaica.

Deposit-taking institutions will be required to notify the Bank of Jamaica (BOJ) about the measures they will take to become compliant with the Banking Services Code of Conduct by the end of November this year, according to central bank Governor Brian Wynter.

Those measures should then be in place within a period not exceeding 12 months from the effective date of the code, August 30, 2016, or by the end of August 2017.

Banks are currently assessing the impact of the code of conduct and the likely costs to implement it, George Roper, member of the compliance committee and the public policy and legislative committee of the Jamaica Bankers Association (JBA) told the Financial Gleaner.

However, Roper said the JBA would not be able to say at this time what are the likely costs and how much of that will be passed on to consumers.

He said that the banks will be required to identify to the Bank of Jamaica by the November deadline any gaps between their current practices, noting that all banks have some mechanism in place for dealing with complaints, among other things outlined in the Banking Services Code.

He said the JBA also has its own code, and the difference between that and the Banking Service Code is that compliance with JBA's is voluntary.

The Banking Service Code lays down minimum standards, and where any of the banks and other deposit-taking institution departs from that, then the enforcement power that the BOJ has would be brought to bear, Roper said.

In some cases, he said the recommended practice in the JBA's code "is more stringent than the Banking Services Code and, in other case, it's the reverse".

The enforceable banking code provides for commercial banks, merchant banks and building societies to, among other things, notify customers of fees, charges, terms and conditions of contracts and give reasonable notice of changes to fees, charges and terms and conditions of contracts.

It also provides for the financial institutions to have effective mechanisms to address customer complaints, advise them of the procedure to make a complaint, maintain records in relation to complaints received, as well as maintain adequate records of transactions.

"To err is human, and to confess is divine, so where a deposit-taking institution fails to comply with the code, Bank of Jamaica can either issue a warning or give direct instructions to comply with whatever article of the Code has been or is being breached," Wynter said.

"A deposit-taking institution that does not comply with a direction given by the supervisor (of banks) commits an offence," the central bank governor said while addressing a press conference in downtown Kingston on Wednesday.

Wynter said, however, that the code is not a panacea and must be seen as the start of a process and not the end.

He said that while Jamaica required a high level of prudentially sound operations, not enough focus has been placed on ensuring that there is an enforceable minimum standard of service provided to clients of those institutions.

Wynter said it was not the role of regulators to micro-manage bankers and to tell them how to run their business beyond operating within the prescribed regulations.

"I must also stress that we operate in a free market, where you have choices, and so competition usually takes care of service standards, supported by relevant agencies like the Consumer Affairs Commission and the Fair Trading Commission," said.

"You can always take your money and go elsewhere, and since bankers know this, the logical expectation is that they should always try to give you the best service at the best price in order to keep your business and attract more business," he added.

However, he said that even the best systems are not perfect, and a free-market environment does have its limitations.

Wynter said in that regard, the BOJ has over time received numerous complaints, although some may have been misplaced or better directed to another agency.

"Our reticence about acting on some of those complaints does not mean that, as a regulator, the central bank does not care how a bank treats its customers," he said.

"Nothing could be further from the truth. We have a vested interest in making sure that our banks, merchant banks and building societies are treating all their customers, existing and new, in a fair and transparent way."

He noted, however, that the BOJ is a creature of statute, "and we regulate banks within a context of legislation that empowers us to do so. Up to now, no legislation existed regarding the conduct of deposit taking institutions towards their customers".