Non-banking sector needs further nurturing to grow – Gooden
Speaking at the Jamaica Stock Exchange’s (JSE) 15th Regional Investments and Capital Markets Conference on Tuesday, Head of the Jamaica Securities Dealers Association of Jamaica (JSDA), Steven called for the phasing out of the asset tax on the financial sector.
Head of the Jamaica Securities Dealers Association of Jamaica (JSDA), Steven Gooden, indicates that the non-banking financial sector valued at just under $2 trillion, needs further nurturing to grow.
He, therefore, called for investment in the development of professional services for the financial sector.
Speaking at the Jamaica Stock Exchange’s (JSE) 15th Regional Investments and Capital Markets Conference on Tuesday, Gooden also called for the phasing out of the asset tax on the financial sector.
Gooden, who also serves as CEO of NCB Capital Markets committed to using savings from an abolished asset tax to help develop the micro, small and medium-sized enterprises sector.
“NCB Capital Markets is willing to commit its savings, over the next three years, to provide much-needed equity financing to micro and small to medium enterprises. This is approximately $1 billion. We would work closely with the JSE and other key stakeholders in making this a reality.”
Though applauding the Government of Jamaica for regulatory changes which were introduced in 2019, he said the financial services sector is being held back by certain structural deficiencies.
“One of the structural deficiencies of our economy is the lack of linkage across sectors….Why can’t we create an offshore and/or nearshore outsourcing sector geared towards providing professional services, such as analytics, risk management, accounting to multinational financial firms?”
“Such job opportunities, while attractive to locals would be much cheaper to procure here than places such as New York. This move would basically involve us exporting financial services, which would allow us to scale the contribution of the financial services sector to GDP, create very lucrative high-value job opportunities to our workforce and further elevate the profile and capabilities of our financial sector.
Gooden acknowledged that Jamaica has experienced significant changes to regulations aimed at strengthening and deepening the local capital markets, but said more needs to be done.
“During the year, we saw the expansion of the universe of allowable assets for institutional investors such as pension funds and insurance companies, affecting favourably the demand for financial instruments,” he noted.
Additionally, on the supply side, regulations were enhanced to encourage more public debt issues and to create a ratings culture, he said.
Gooden applauded the GOJ’s policy decision to divest state-owned companies into the hands of the public but said that while changes have influenced both the demand and supply sides of the capital markets ecosystem - market liquidity and price transparency remained areas where change was needed.
“Transparent and liquid markets are facilitated by platforms, access to funding and market makers. The market maker ensures that there is a continuous two-sided market, contributing to better overall market quality as we seek to consolidate all favourable regulatory changes mentioned,” he said.
Good encouraged policy change at the government level to complement the efforts of the securities dealers.
“The reality is more can be done to nurture this important function. To effectively execute on this role, a key ingredient in addition to others is balance sheet and unfortunately, we continue to tax the balance sheets of securities dealers impeding our ability to make a market.”
As such, he called on the government to start phasing out the asset tax for securities dealers.
“Many dealers generate spreads of less 100 bps when executing its market-making mandate. With an asset tax of 25bps, which is not a tax-deductible expense, the effective charge is 37bps, a major impediment to market-making. We estimate this cost to dealers to be $1.3 billion per annum,” Gooden outlined.
He also suggested that regulatory reform be treated as an ongoing exercise.
“The markets are ever-evolving… As a nation, and a region, we are plugged into a global market and an as such it is very important that we invest in the capacity of our regulatory institutions to ensure that relevance and market soundness is maintained.”
He said, “We must ensure that regulatory reform is not a discreet activity that happens every few years, but one that is continuous and in harmony with changing times and opportunities.”