The Bank of Jamaica stated cash, bank balances and investments were ‘safe haven’ assets for deposit taking institutions (DTIs) in 2020.
During the year, cash and bank balances increased substantially by 23.4 per cent ($70.6 billion) compared with growth of 6.5 per cent ($18.3 billion) in 2019, the BOJ report said in its new annual report.
The growth in 2020 reflected increased placements with overseas banks ($33.7 billion) and domestic currency current account holdings at BOJ ($25.4 billion) as DTIs stored excess liquidity from net customer deposit inflows.
Consequently, cash and bank balances as a share of total assets grew to 18.4 per cent at year-end 2020 from16.7 per cent at end-2019.
Similarly, the BOJ outlined the securities holdings of DTIs expanded by a higher rate of 10.5 per cent ($44.6 billion) at end-2020 relative to 5.1 per cent ($20.6 billion) at end-2019.
This faster pace of growth in investments reflected increased holdings in foreign currency GOJ debt ($34.0 billion) and domestic currency BOJ securities ($28.3 billion) as DTIs channelled liquidity into low-risk securities.
However, the Central Bank noted there was a partly offsetting impact from contractions in overseas government and corporate debt ($14.1 billion), as licensees reduced their exposure to jurisdictions and business sectors heavily affected by the pandemic.
DTIs also reduced their holdings in domestic currency GOJ investments ($6.6 billion) following their participation in the BOJ asset buyback programme which was implemented to stymie the adverse liquidity effects of the pandemic on the financial system.