Central Bank

A central bank is an independent national authority that conducts monetary policy, regulates
banks, and provides financial services including economic research.

Its goals are to stabilize the nation's currency, keep unemployment low, and prevent inflation.

Functions:

 The Central Bank has the sole authority to issue notes and coins.
 The Central Bank is a banker to the government as it keeps the government accounts
 It manages the national debt
 It is a banker to all banks as commercial banks must keep an account with the central
bank
 A lender of last resort-The commercial banks and all other financial institutions can count
on the central bank for financial assistance
 It is a financial agent for government. The government uses the Central Bank to carry out
its economic policies. These policies are known as monetary policies.

Services offered by financial institutions

 night safe deposits - A night depository is a bank drop box where merchants can deposit
their daily cash, checks and credit card slips outside of normal banking hours

 online banking - Online banking allows a user to conduct financial transactions via the
internet such as deposits, transfers, and online bill payments.

 advisory services - have expertise in one or more investment areas and provide guidance
that is tailored to an individual's specific situation.

 credit and debit cards - Debit cards allow bank customers to spend money by drawing on
funds they have deposited at the bank. Credit cards allow consumers to borrow money
from the card issuer up to a certain limit to purchase items or withdraw cash.

 trustee work - A trustee is a person or firm that holds and administers property or assets
for the benefit of a third party.

 deposit boxes - is usually located inside a bank and is used to store valuables and they
can be accessed with keys, pin numbers or some other type of security pass. Valuables,
such as documents and jewellery are placed inside, and customers rely on the security of
the building and vault to protect those valuables.
 ATM/ABM services - is an electronic telecommunications device that enables customers
of financial institutions to perform financial transactions, such as cash withdrawals,
deposits, transfer funds, or obtaining account information, at any time and without the
need for direct interaction with bank staff.

 e-trade - offers an electronic trading platform to trade financial assets including common
stocks, preferred stocks

 settlement services - is a party who helps complete a transaction between a buyer and
seller. This is done through the transfer of securities to the buyer and the transfer of cash
or other compensation to the seller.

 remittance services - A remittance is a transfer of money by a foreign worker to an

individual in their home country.

Role and functions of financial regulatory bodies

1. Jamaica Deposit Insurance Company was created by the Government of Jamaica to

protect depositors and promote stability and confidence in Jamaica’s financial system.

It became the latest plank in strengthening the sector’s regulatory framework at its
establishment on August 31, 1998.

Functions:

 Provide the highest level of coverage possible to small depositors.

 Restore and maintain confidence in deposit-taking institutions and by extension
contribute to the stability and confidence in the nation’s financial sector.
 Provide a clearly defined system for dealing with problems which may arise in
insured financial institutions.

2. Financial Services Commission (FSC) supervises and regulates the securities industry,
the insurance industry and the private pensions industry. As such it may be properly
described as an integrated financial services regulator.

Protection of the interests of policyholders is the primary consideration for the Financial
Services Commission (FSC) in its role as supervisor and regulator for the insurance
industry. Monitoring both local and foreign companies offering life, health and general
insurance products, and the activities of Brokers.
 Commercial Bank

Role of Commercial Banks

A commercial bank is a type of financial institution that accepts deposits, offers checking
account services, makes various loans, and offers basic financial products like certificates of
deposit (CDs) and savings accounts to individuals and small businesses.

The general role of commercial banks is to provide financial services to general public and
business, ensuring economic and social stability and sustainable growth of the economy.

Services offered by Commercial banks

 provide advisory services to clients who wish to borrow a loan to make
investments and persons who wish to purchase securities.
 Safety deposit boxes used to store items that individuals deem as highly
valuable.
 Selling travellers cheques.
 Credit cards allow persons to purchase items by using funds that the bank
makes available.
 Accepting Deposit. ...
 Advancing of Loans. ...
 Discounting of Bill of Exchange. ...
 Cheque Payment. ...
 Remittance. ...
 Collection and Payment of Credit Instruments. ...
 Foreign Currency Exchange. ...

Non-bank financial institutions

Credit union
A credit union is a financial co-operative which is made up of a group of persons who
join together to make certain financial services available to themselves the members of
the credit union. The major services offered by a credit union is to provide a facility to
save money and to make loans available to members at a rate of interest lower than
the commercial rate.
All members of any one co-operative must have something in common. They must all
fall under what is called a common bond of the co-operative, before they can become
eligible to join that particular co-operative. The bond could be, for example, that the
people all live in the same Parish or community or that they are involved in the same
activity or profession.

Insurance companies
A business that provides coverage, in the form of compensation resulting from loss,
damages, injury, treatment or hardship in exchange for premium payments. The
company calculates the risk of occurrence then determines the cost to replace (pay for)
the loss to determine the premium amount.

Building societies
A building society is a financial institution owned by its members as a mutual
organization. They offer banking and other financial services to its members. They are
similar to credit unions in organisation, though few enforce a common bond. However,
rather than promoting thrift and offering unsecured and business loans, the purpose of
a building society is to provide home mortgages to members. Borrowers and depositors
are society members, setting policy and appointing directors on a one-member, one-
vote basis.

Micro-lending agencies

One of the most used such applications is microlending, or microcredit. Microloans are small
loans that are issued by individuals rather than banks or credit unions. These loans can be issued
by a single individual or aggregated across several individuals who each contribute a portion of
the total amount. Often, microloans are given to people in Third World countries, where
traditional financing is not available, to help them start small businesses. Lenders receive interest
on their loans and repayment of principal once the loan has matured. Because the credit of these
borrowers may be quite low and the risk of default high, microloans command above market
interest rates making them enticing for some investors.

Government agencies

A government or state agency is a permanent or semi-permanent organization in the machinery

of government that is responsible for the oversight and administration of specific functions, such
as an intelligence agency. There is a notable variety of agency types. Although usage differs, a
government agency is normally distinct both from a department or ministry, and other types of
public body established by government.

The functions of an agency are normally executive in character, since different types of
organization are normally used for advisory functions, but this distinction is often blurred in
practice

Share market

A stock market, or share market, is a market for the trading of company stock or shares. A
company’s assets can be divided into equal parts called shares. A collection of shares is called
stock. At times, the terms ‘stock’ and ‘shares’ are used interchangeably. An investor might own,
say, $5000 worth of company stock, which could be 1000 × $5.00 shares or 2000 × $2.50 shares.
The stocks might be listed on the stock exchange or traded privately. The term ‘the stock market’
is simply the mechanism that enables the trading of company stocks. The sellers in the share
market are the company itself and other holders of shares. The buyers might be other companies,
bank and non-bank financial institutions, or private individuals. The items traded are the shares
of different companies.

Stock markets

 The stock market is one of the most important sources through which companies can
raise money.
 At the stock market, investors can quickly and easily sell shares, and so obtain cash. This
is an advantage of investing in stocks, compared with, say, real estate.
 The price of shares can be an indicator of business conditions in an economy. Rising
share prices, for instance, tend to be associated with an increase in business investment,
and falling share prices with a decrease.
 Share ownership allows private individuals to earn additional income.
 A stock exchange is often the most important component of a stock market.

Stock exchange

A stock exchange is a corporation that brings buyers and sellers of company stock together. The
stock exchange is also called a ‘bourse’. It provides facilities for stockbrokers and traders to
trade company stocks. A stockbroker is a licensed individual who acts as an agent for clients,
buying and selling shares in the market on the client’s behalf. The stockbroker really makes the
market, as he/she brings buyers and sellers together. To be able to trade shares on a certain stock
exchange, the company has to be listed there. The company must be a public limited company.
Some examples of stock exchanges in the region are the Trinidad and Tobago Stock Exchange,
the Jamaica Stock Exchange, the Guyana Stock Exchange and the Eastern Caribbean Securities
Exchange.

 The stock exchange facilitates the trading of shares, as the exchange is responsible for the
collection and delivery of shares. It guarantees payment to the seller. This eliminates the
risk to an individual buyer or seller that the other party could default on the transaction.
 The stock exchange contributes to increased prosperity of the economy as businesses
obtain funds, and companies and households have the opportunity to invest and even
make profits.

Development bank

A development bank is an institution set up to facilitate growth and production in a particular

sector in the economy. It grants loans at competitive rates to potential investors. Developments
banks do not accept deposits from the public. Funds are obtained from international and regional
institutions, and grants from the government. The development bank might invest its idle funds
in securities to increase its earnings. An example of a development bank is the Agricultural
Development Bank (ADB) of Trinidad and Tobago.

Mutual fund

A mutual fund is a collective investment company. An investor buys a share in the mutual fund
and is paid a dividend based on the number of shares he holds. The dividend might be at a fixed
rate, or it might vary depending on the performance of the fund. The fund pools money from
many investors and invests their money in a range of securities. The advantage of the mutual
fund is that the investor has the services of an expert fund manager to make investment
decisions. The investors’ collective funds are used to invest in securities to which the individual
investor might not normally have access.

Informal credit institutions

For many years, the financial sector in the Caribbean economies remained relatively
underdeveloped. However, the people of the Caribbean had financial needs that had to be
satisfied. Informal financial institutions developed, arising from the needs of the people. In later
years, formal financial institutions extended to reach a larger part of the population. However,
the people of the Caribbean still held onto these simpler institutions. As a result many of these
informal institutions exist to this day. Some of them include:

Sou sou. This is an informal arrangement where a small group of people contribute an equal
fixed sum each week or month on payday to a common fund, called a pot. The total amount paid
in by all participants goes to one member of the group each week or month. This sum is called a
hand. In some sou sou, there is a small tax on participants to pay the person running the sou sou.
This is called a box. People will ‘throw’ a sou sou with others whom they know, such as
neighbours or work colleagues. Clearly, if you took one of the earlier hands, it is as if you are
borrowing the sum of money at zero per cent interest and repaying by instalments in later
weeks/months. If you took a later hand, then it is as if you were saving up your money to get a
lump sum later. The sou sou lives on to this day in Caribbean islands such as Trinidad and
Tobago, St Lucia, St Kitts and Tortola. Versions of this arrangement are called Partner and
Meeting Turns. This savings scheme is popular amongst Caribbean people, South Americans,
and Africans and their descendants in other parts of the world, such as the USA.

Money lenders.

In Caribbean societies, money lenders or usurers also used to conduct a fair amount of business.
We might question how fair the business was, though. The usurers usually lent money at very
high rates of interest to borrowers. However, the borrower might not have to put up any security
(collateral) to obtain the loan. Money lenders and their activities still survive in Caribbean
societies, especially the rural areas.
 Functions offered by financial institutions

Loans/ credit facilities - A credit facility is a type of loan made in a business or corporate
finance context, including revolving credit, term loans, committed facilities, letters of credit and
most retail credit accounts. A credit facility lets a company take out an umbrella loan for
generating capital over an extended period of time.

Terms and Structure of a Credit Facility

A credit facility agreement details the borrower’s responsibilities, loan warranties, lending
amounts, interest rates, loan duration, default penalties, and repayment terms and conditions. The
contract opens with the basic contact information for each of the parties involved, followed by a
summary and definition of the credit facility itself. The summary includes a brief discussion of
the facility’s origin, the purpose of the loan and how funds are distributed. Specific precedents
on which the facility rests are included as well. For example, statements of collateral for secured
loans or particular borrower responsibilities may be discussed.

Repayment Terms of a Credit Facility

The terms of interest payments, repayments and loan maturity are detailed. They include the
interest rates and date for repayment, if a term loan, or the minimum payment amount and
recurring payment dates, if a revolving loan. The agreement details whether interest rates may
change and specifies the date on which the loan matures, if applicable.

Savings and deposits - A savings account is an interest-bearing deposit account held at a bank
or other financial institution that provides a modest interest rate. Financial institutions that offer
savings accounts may limit the number of withdrawals from an account each month.

How a Savings Account Works

Savings accounts generally are opened to keep money not intended for daily or regular expenses.
Savings accounts differ from checking accounts, which allow the use checks and electronic debit
to access funds. Additionally, savings accounts—unlike checking accounts—typically have
limits on the number of withdrawals or transactions you may make each month.

a) making payments
b) investments