An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

Cash was safe haven of 2020 – Bank of Jamaica

An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

The Bank of Jamaica stated cash, bank balances and investments were ‘safe haven’ assets for deposit taking institutions (DTIs) in 2020.

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

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.