BOJ frees up foreign cash
The Bank of Jamaica (BOJ) has softened its stance on liquidity requirements for foreign currency holdings, with a two percentage point cut in the cash and liquid assets that banks must deposit with the central bank.
"The receipt of loan flows from multilateral financial institutions in February has put the BOJ in an enhanced position to maintain stability in the foreign exchange market," the central bank said.
"Gross foreign reserves currently exceed US$2.2 billion and are likely to grow further before the end of the fiscal year."
The adjustment allows the bank to hold on to a larger pool of foreign cash that could, technically, boost foreign currency lending.
Effective Monday, March 1, the cash reserve requirement for foreign currency prescribed liabilities of deposit-taking institutions was reduced from 11 per cent to 9.0 per cent, while the liquid asset ratio has been reduced from 25 per cent to 23 per cent.
The adjustments drop the ratios back to their December 2008 positions. The reserve and liquid asset requirements for Jamaican dollar liabilities, however, remain unchanged at 11 per cent and 25 per cent, respectively.
"The reduction in the requirement will allow deposit-taking institutions more latitude in the allocation of their foreign currency portfolios, including expanding credit to the business sector," BOJ said.