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BSAJ: Criminal negligence provision will cool enthusiasm of directors

Published:Wednesday | May 21, 2014 | 12:00 AM

Avia Collinder, Business Reporter

Private mortgage bankers have taken issue with the provision for criminal negligence being attached to company directors and officers, and the limitations on decisions of the banking regulator that can be appealed under the proposed Banking Services Act.

The positions reflect similar concerns of commercial banks, which raised the issue last Wednesday at the start of public consultations on the banking bill.

The position of the mortgage bankers or building societies was heard on the weekend by the parliamentary committee reviewing the bill.

The Building Societies Association of Jamaica (BSAJ) said "attaching criminal liability to negligent conduct will have a chilling effect on directors and officers of DTIs and is certainly not the norm."

The group said such a provision, captured in Section 128 of the bill, "may drive away qualified independent directors from directorship of DTIs .... We strongly recommend that this section be amended so that liability only arises in the event of intentional or proved reckless conduct."

It drew a comparison with Section 124 of the bill, which shields supervisory staff as long as they act in good faith.

The new banking legislation will expand the powers of the Bank of Jamaica (BOJ) as supervisor of deposit-taking institutions.

Noting the BOJ's regulatory reach as laid out in the bill - which even includes approval over joint marketing and co-branding - the BSAJ said they were legitimate matters, but says building societies ought to have the right to appeal all decisions to the Supervisory Appeals Board.

Four areas of appeal are detailed in the banking services bill.

The group also sought reassurance that building societies "will be accorded preferential cash reserve treatment".

The societies currently have lower liquidity reserve requirements than the commercial banking sector, but under reform of the deposit-taking sector, the central bank aims to align the ratios.

Building societies now place just one per cent of their cash with the BOJ and five per cent of all liquid assets. They want those ratios to be maintained. The reserve ratio for commercial banks is 12 per cent cash and 26 per cent liquid assets.

The building societies sector comprises three players - Jamaica National, Victoria Mutual and Scotia Jamaica.