LECTURE 20

BUSINESS FINANCE

Financial Sector

The financial sector is made up of agencies such as:

• Government financing agencies

• Central bank,

• Commercial banks,

• Mortgage companies,

• Credit unions

• Insurance companies

• Building societies - A building society is a type of financial institution that provides banking
and other financial services to its members. Building societies resemble credit unions in that they are
owned entirely by their members.

• Micro-lending agencies – eg Island Finance

• Unit trust, stock market.

• Development banks (Caribbean Development Bank, Agricultural Development Bank)

A commercial bank- is a financial institution that provides a range of financial services to individuals
and business clients. They accept deposits and give loans. The bank pays a percentage to the
depositor as interest or gain on the deposit. In essence they borrow a surplus of funds to lend to
those who are experiencing a shortage.

Role of Financial Institutions

• Commercial bank accepts money deposits and therefore provides a safe place for saving
money.

• Offering loans and overdraft to persons who need financial assistance.

• Assisting customers to easily make payments through standing orders, current accounts and
debit cards.

• They also offer investment opportunities such as mutual funds, annuities and stocks and
bonds
Services offered by Financial Institutions

• 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 at the bank are used to store safely items that individuals deem as
highly valuable.

• Selling travellers cheques.

• Credit cards allows persons to purchase items by using funds that the bank makes available.
There is a limit to how much the bank makes available to credit card holders.

• Offer a variety of deposits- Money can be deposited in a current account upon which
cheques can be drawn or a fixed deposit account where a higher interest rate is earned. Foreign
currency can also be deposited.

• Credit facilities (loans) can be provided through deposits where through using a cash ration a
portion of the deposits are kept in the bank while the rest are loaned.

• Money Transfers (remittance services) from depositors account to another account. This
called a standing order. They also facilitate bank drafts and letters of credit.

• Trustee work - Any individual or company who manages assets on behalf of another. For
example, a bank may hire a trustee to distribute funds from a loan to the borrower.

• Offering settlement services such as authorizing credit card payments

Cheques:

Essential data on a cheque:

• The date, payees name, the amount, the signature, personal cheque account number, other
data (counterfoil, branch number)

Types of cheques:

• Bearer cheques- Paid to the person who bears or presents the cheque.

• Order cheques – Paid to the person that the cheque instructs payment to.

• Open cheque – can be cashed over the counter and can be cashed by the wrong person

• Crossed cheque – can only be paid into a bank account.

JDIC works in close collaboration with the Bank of Jamaica (BOJ), the regulatory and supervisory
agency for deposit-taking financial institutions. It receives copies of the Bank’s on-site examination
reports as well as all other information relating to the safety and financial soundness of insured
institutions (Policyholders)

Financial Services Commission (FSC)

• The mandate of the Financial Services Commission (FSC) is to supervise and regulate the
securities, insurance and private pensions industries.

• In doing so the FSC oversees the registration, solvency and conduct of firms and individuals
doing business in the securities and insurance (Life and General) industries.

• The FSC oversees these entities by administering a number of statutes and accompanying
regulations.

• The FSC also handles customer complaints and provides the public with important financial
information

Supervisor of Insurance

To protect the interest of the public, whether as a consumer or third party. This is done through the
monitoring of insurance entities and pension administrators to ensure financial stability and use of
fair business practices while carrying out their business operations.

Administration of the Insurance Act and Regulations

Licensing of Insurance Companies and Insurance Intermediaries

Ensure the payment of appropriate annual fees

Monitor statutory departments and statutory funds

Review annual financial statements submitted by insurers and intermediaries

Ensure overall compliance by all licensed insurance entities with requirements of the
Insurance Act and Regulations