DAVIES
Minister of Finance and Planning Dr Omar Davies responds below to an editorial published in yesterday's edition of The Jamaica Gleaner.
I WRITE as a response to your editorial in your edition of Tuesday January 10, 2006 entitled 'Rethink pension proposal'.
The editorial identifies various concerns about the supporting regulations for the Pensions Act which was passed in 2004 and urges caution about approving these regulations "before the legitimate concerns of the stakeholders have been mutually resolved.".
It is clear that the writer of the editorial has not been fully briefed on our efforts to consult with stakeholders. The facts are that the Financial Services Commission (FSC) and the Ministry of Finance have been in continuing dialogue with the representatives of the workers and in more recent times with members of the special PSOJ committee established to review the new piece of legislation.
These discussions have proceeded well, and meaningful adjustments have been made to the original regulations because of the input of the stakeholders.
COMPROMISE AGREEMENT
We are confident that by the time the regulations are again considered in the Senate, all interested parties would have reached a mutually satisfactory compromise agreement.
I feel obliged to respond specifically to the editorial's assertion that the charges which will be imposed by the FSC to regulate pension schemes are onerous and a more practical solution is to have the Bank of Jamaica regulate the industry. The editorial actually goes further to suggest closure of the FSC.
The Bank of Jamaica's ability to regulate financial institutions without imposing direct charges on them is only facilitated by virtue of the fact that the institution has significant other sources of income.
Furthermore, by law, the Ministry of Finance is obliged to cover any losses recorded by the Central Bank.
The FSC has no such protection or independent sources of income. One option is that the cost of regulation be met from the Consolidated Fund.
SIGNIFICANT COSTS INVOLVED
However, the policy of charges being levied to cover the cost of regulation is now universally accepted. In other words, regardless of whether or not the industry is regulated by the FSC or the BoJ, there are significant costs involved which must be met.
The approach which is being taken for the pensions industry is identical to that which has been taken for the securities and insurance industries. Therefore, it must be understood that the pensions industry is not being treated in a discriminatory manner.
TASK FORCE
In terms of the continued involvement of concerned parties in the regulation of the sector, I intend to formally constitute a task force comprising representatives of the various stakeholders as well as FSC officials.
The main role of this body will be to deliberate on the next steps which must be taken to ensure that this critical area of the financial sector operates within a regulatory framework which meets the most rigorous international standards.
Finally, it is imperative that it be noted that the Government's sole interest in this matter is the protection of the savings of the contributors to the various schemes. The Treasury will not benefit by even one cent from the passage of this long overdue piece of legislation.
