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BOJ to make changes to forex cash reserve requirements

Published:Wednesday | February 22, 2017 | 12:00 AM
The Bank of Jamaica at Nethersole Place, Kingston, is soon to take over regulation of credit unions. The reform has been under way since 1999.

The Bank of Jamaica (BOJ) is implementing a three percentage point adjustment in the cash reserves and liquid assets that deposit-taking institutions are required to hold against foreign currency liabilities.

The adjustment will be in two steps, beginning with an increase of two percentage points on the first business day in March 2017. The remaining one percentage point will be effected on the first business day in April 2017.

The adjustment is aimed at reducing the incentive to hold foreign currency liabilities, the BOJ said in a release.

It said no change is being made to the reserve requirements applicable to Jamaican dollar prescribed liabilities.

During the last three months of 2016, the BOJ gradually increased the cash reserves and liquid assets requirements for foreign currency liabilities in the banking system to bring them in line with the reserve requirements for Jamaican dollar liabilities.

This removed the bias in the structure of the reserves requirements that favoured foreign-currency deposits, the central bank said.

At December 2016, the cash and liquid assets reserve requirements were 12 per cent and 26 per cent, respectively, for both foreign currency and Jamaican dollar liabilities.

Remuneration for foreign currency cash reserves was also discontinued, bringing it into conformity with the treatment for Jamaican dollar cash reserves, the BOJ said.