Gary Barrow (left), acting president of Cable & Wireless Jamaica, Ltd., yesterday accepting a platinum trophy from Derick Latibeaudiere, Governor of the Bank of Jamaica, during the opening of the 14th World Conference of Banking Institutes at Le Meridien Jamaica Pegasus Hotel, New Kingston. C&WJ received the trophy for sponsoring in part the five-day conference which ends on Friday. - Norman GrindleyDESPITE THE turbulence in the world's financial markets in recent years, the restructuring and consolidation of the Jamaican financial sector has contributed to a more solidly-based financial environment locally, Prime Minister P. J. Patterson said yesterday.
Noting that the Bank of Jamaica, the central bank, had placed significant emphasis on performance standards and prudent bank management, Mr. Patterson said that had contributed to a marked improvement in capitalisation, a reduction in non-performing loans and overall improvement in the profitability of the sector.
"All of this has compelled the Bank of Jamaica to significantly upgrade the facilities for the training and development of the staff of the central bank, particularly in relation to training in areas critical to the development of sound banking systems," he said.
The Prime Minister was speaking yesterday at the official opening of the 14th World Conference of Banking Institutes at Le Meridien Jamaica Pegasus Hotel, New Kingston. The five-day conference, which ends on Friday, is taking place under the theme, "Globalisation -- Challenges and Opportunities Facing Financial Insti-tutions" and is being attended by 90 delegates from 45 countries.
Mr. Patterson noted that Jamaica was hosting the conference at an appropriate time "as our policy-makers and bankers are in the process of building a more robust banking system and positioning the financial sector to participate more fully in a global economy."
Against the background of financial innovation and changes brought about by technological advances, the Prime Minister argued that effective bank and risk management, as well as the role of supervisory oversight and best-practice standards were critical to the maintenance of the health of the banking sector and the achievement of stability in the financial system.
Pointing to the rapid growth of information and communication technologies which have, among other things, increased the speed of transactions and the volatility in financial markets, Mr. Patterson said:
"It is therefore clear to me that the long-term success of any banking organisation depends increasingly on developing more sophisticated methods of internal control and management; ensuring sound corporate governance and preserving discipline both within and outside of the institution."
According to Mr. Patterson, for commercial banks to remain competitive, risk management would have to assume greater precision, and risks would have to be more accurately measured, monitored and reported.
Within the context of the individual firm, he said, the definition of a sound or adequate risk management system was also likely to change as new technology facilitated better information and further innovation, and as market efficiency grew. "This will sometimes imply a need for changes in the traditional thinking and culture of banking institutions," Mr. Patterson said. He suggested that banking institutes could play a major role in developing a culture of appreciation for those changes, especially where innovation demanded changes in techniques and traditional methods of operation.
The Prime Minister said that although banks had primary responsibility for ensuring the soundness and safety of their operations, governments had recognised that banking and other financial institutions must be subject to some form of regulation and official oversight.
"Bank supervisors need a broad mandate to ensure that markets operate in a fair, transparent and efficient manner and that participants comply with the rules of the game," he said. "In this way, bank supervision promotes financial stability and minimises systemic risk."
Banking institutes could also make a significant contribution in further enhancing the level of co-operation between the supervisory authority and the banks, by seeking to promote greater convergence to supervisory standards and best practices, he said.
