KINGSTON, Jamaica – Earl Jarrett, General Manager of the Jamaica National Building Society (JNBS) disclosed that the Bank of Jamaica (BOJ) has indicated that it has “No Objection”, in principle, to the Society’s conversion to a commercial and the proposed Group restructuring, to be compliant under the new Banking Services Act.
Addressing members at the Society’s 141st Annual General Meeting at the Jamaica Pegasus in New Kingston, July 29, Mr Jarrett revealed that the BOJ indicated its non-objection by way of a letter in March of this year, signalling the mounting of the first hurdle in JNBS’ move to convert to a commercial bank.
The BOJ recently completed its audit of the Society’s credit operations; and, Jamaica National is awaiting the central bank’s review of the findings.
“This is a major achievement for us; and, will prepare the Society for the next stages, which are to apply to the Courts; and, then to hold a Special General Meeting with members to discuss the details of our reorganisation process, to obtain members’ approval for the conversion,” Mr Jarrett said.
“We have come a long way since we began this process some seven years ago, and we are committed to seeing it through,” he advised members.
JNBS re-submitted its application for a commercial banking licence in November 2013 along with its business plan to restructure the JN Group to meet the requirements of the new Banking Services Act. The building society previously made an application to the BOJ for a banking licence in 2008.
If its current application is approved by the BOJ, it would make JN the third largest commercial bank in the country with 12.8 per cent of the market, behind the National Commercial Bank and Scotiabank with approximately 36 per cent and 26 per cent, respectively.
“This re-organisation is a complex one, which has not been achieved in Jamaica before; and, therefore, we are learning and charting new paths as we go along,” he told JN members at the AGM.
To remain compliant with the Banking Services Act, passed last year, JN proposed a structure to the BOJ, which will enable members to be shareholders of a single mutual holding company to own all JN assets, Mr Jarrett explained.
“We have been careful to ensure that our members are not short changed in the process, and that the concept of ‘mutuality’ will remain a principal focus at the core of the new structure,” he said.
Under its proposed structure, the building society will transition to a commercial bank, which, along with other regulated companies in the JN Group, will be owned by a financial holding company. The ownership of the remaining non-regulated companies will be assumed by a non-financial holding company. Both financial and non-financial holding companies will be fully-owned by the mutual holding company.
Mr Jarrett stated that the conversion of JNBS to a commercial bank will allow the organisation to offer a more competitive and expanded range of credit products and services, beyond the options which building societies now offer.
And, he emphasised that the change was also necessary for the organisation to maintain its relevance.
“We have to change because legislative modifications, such as the Banking Services Act, require the separation of risks associated with financial and non-financial operations within groups of companies. We have to change because our customers are demanding more financial services than the Building Societies Act allows us to offer. We have to change, because, if we do not move with the times, we will indeed become irrelevant,” he sermonised.
JNBS and its subsidiaries performed reasonably during the 2014-2015 financial realising a net surplus of $1.21 billion.
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