According to Ely (2008), “financial regulation is a form of supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. The regulatory body may be handled by either a government or non-government organization”. The Jamaican financial landscape consists of various financial institutions. These include banks, security brokers, pension schemes and insurance companies.
The main objectives of the financial regulator are usually:
• Market confidence – to maintain confidence in the financial system
• Financial stability – contributing to the protection and enhancement of stability of the ...view middle of the document...
Some of the commercial banks were not adequately capitalized and the regulatory restraint weakened the troubled commercial banks and other financial institutions, and dampened economic growth and development; thus causing the Ministry of Finance to implement further financial regulation to alleviate the challenges faced by banks, insurance companies and other financial institutions from a severe liquidity and solvency crisis.
The problems experienced in Jamaica, in the middle of the 1990’s (1996-1999), also affected the life and general insurance industry negatively and led the government to examine the causes. Measures were implemented that were aimed at solving the problems associated with the life insurance industry. In the process, a number of life insurance companies were forced to merge to ensure viability. In contrast, the general insurance industry saw only one failure which was salvaged through government assistance. The recession in the USA also caused further challenges, and in early 2000 there were various unregulated investment schemes such as Olint, Cash Plus and World Wise Partners. These schemes promised depositors high interest rates compared to rates offered by the Jamaican banking sector. With an increase in the number of unregulated investment entities, and challenges faced by banks, insurance companies and as well as depositors; the Financial Services Commission (FSC) came into existence on August 2, 2001 by virtue of the Financial Services Commission Act.
According to the Financial Services Commission (www.fscjamaica.org), the FSC has replaced the Office of the Superintendent of Insurance (OSI) and Unit Trusts and the...