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HomeNewsCaribbean NewsBank of Jamaica reduces domestic and foreign currency cash reserve requirements

Bank of Jamaica reduces domestic and foreign currency cash reserve requirements

By Bank of Jamaica

KINGSTON, Jamaica – Bank of Jamaica has reduced the cash reserve requirements of deposit-taking institutions (DTIs) by two percentage points, effective May 15, 2020. The foreign currency cash reserve requirement has been reduced to 13 percent while the domestic currency cash reserve requirement has been reduced to five percent.

These reserve requirements are the amount of money that DTIs are required to hold at Bank of Jamaica against prescribed liabilities. Both adjustments are therefore aimed at boosting liquidity levels in the financial system in the context of the strain caused by the impact of COVID-19.

The reduction in the foreign currency cash reserve requirement will return approximately US$65.0 million to DTIs and thereby expand the volume of foreign exchange available to them. In addition, the reduction in the domestic currency cash reserve requirement will release approximately J$14 billion to DTIs.

The foreign currency cash reserve was last adjusted in April 2017 when it was increased to 15 percent from 14 percent. The reduction in the domestic currency cash reserve requirement completes the series of reductions that the Bank initiated in 2019 to take it to the statutory minimum of five percent of prescribed liabilities.

Liquid asset requirements will also fall as a consequence of the reduction in the cash reserve requirement. The foreign currency liquid asset requirement will fall to 27 percent while the reduction in the domestic currency cash reserve requirement will cause the overall domestic currency liquid asset requirement to fall to 19 percent. No interest is paid on cash reserves.

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