JAMAICA-BOJ says financial system could absorb negative impact of Hurricane Melissa.

KINGSTON, Jamaica, CMC – Bank of Jamaica (BOJ) says the domestic financial system remained stable during the September 2025 quarter and that the respective financial system sub-sectors possess sufficient capital and liquidity to absorb the negative impact of Hurricane Melissa and to support the uptick in cash demand as the recovery efforts commence.

The category five storm hit on October 28, resulting in the deaths of 42 people and damage estimated at nine billion US dollars.

The BOJ said that the stability of the system in September was underpinned by enhanced prudential oversight and favourable macroeconomic conditions, and that key contributing factors included real gross domestic product (GDP) growth, low inflation, and a global easing of monetary policy, which supported the orderly functioning of financial markets.

The BOJ, which said that the Financial Policy Committee (FPC) met earlier this week to review the financial system’s performance and systemic risks based on data up to September 2025, said the core elements of the financial sector continued to demonstrate sound performance across key metrics, including adequate capital, solvency, asset quality, liquidity, and profitability.

It said that the FPC, having also considered developments in the December 2025 quarter, including the impact of Hurricane Melissa, noted that the hurricane is expected to affect domestic GDP growth over the coming quarters adversely.

“In addition to key sectors directly impacted by the hurricane – such as Tourism and Agriculture – households in the affected sections of the country are expected to experience weakened debt servicing capacity, potentially leading to an uptick in non-performing loans.

“Notwithstanding the negative impact on credit quality, the deposit-taking sector remains well positioned to absorb this deterioration owing to historically low non-performing loans, high levels of provisioning, and robust capital positions.”

The BOJ said that while insurance claims are likely to increase, this should not significantly impair insurer solvency, given strong reinsurance coverage and low property insurance penetration in some affected parishes.

“The overall impact on the economy is anticipated to be mitigated by financial transfers and gifts in kind from several jurisdictions and agencies to aid the recovery and rehabilitation process, as well as the activation of the government of Jamaica’s disaster risk financing framework, which could provide significant budgetary support.”

The BOJ said that, in assessing financial system resilience, it conducted stress tests and systemic risk evaluations to gauge the financial sector’s ability to withstand shocks to credit, liquidity, and market risks.

“The preliminary results indicated that the respective financial system sub-sectors possess sufficient capital and liquidity to absorb the negative impact of Hurricane Melissa and to support the uptick in cash demand as the recovery efforts commence.”

It said that while institution-specific factors, including internal policies and risk appetite, may lead to varied approaches to customer relief, financial institutions are well-positioned to support the recovery effort.

“This includes currency supply, processing of verified insurance-related payments, and, where appropriate, offering temporary deferral of credit-related facilities. BOJ stands ready to provide the necessary liquidity support to deposit-taking institutions should the need arise and to maintain orderly conditions in the foreign exchange market.”

The BOJ said that climate-related shocks will remain a significant risk and that, to address this risk, authorities have committed to measures to strengthen the financial sector’s long-term climate resilience.

“Financial system supervisors will remain vigilant, actively monitoring the risks and evaluating appropriate policy responses to preserve financial stability in the context of the increasing frequency and intensity of natural disasters.

“Additionally, financial system supervisors will ensure that climate risk mitigation and resilience are effectively integrated into the business models of the financial sector. These efforts form part of a broader agenda to enhance systemic resilience and to protect vulnerable sectors.”

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