JN Acquires Banking Licence In UK

By Jamaica Gleaner,

Jamaica National Group, the largest mortgage lender in the local private market, has landed a banking licence in the United Kingdom that will both allow it do business there and provide cross-border banking services to group members.

Not only is the licence seen as a first for a regional bank, but JN Group’s expansion into commercial banking in the UK offers a solution to the correspondent banking issues faced by Caribbean institutions that have been dropped by their UK partners, as a means of shedding risk.

JN Bank UK Limited, a subsidiary of JN Group, received its UK banking licence on December 12, 2019, according to the UK-based Financial Conduct Authority, the FCA. Its regulators include the FCA and the Prudential Regulation Authority.

JN, a 145-year-old institution that began as a building society, already provides other financial services in the UK. It’s unclear what level of investment it will need to make to kick-start its banking operation, as the group declined to address specific queries from the Financial Gleaner on the licence at this time.

JN Group Limited, which itself was formed in early 2017 after a restructuring of the business and the transition of the building society to a commercial bank, disclosed in its 2019 annual report that it applied for the UK licence as a solution to the cross-border “correspondent banking crisis” and to expand services to persons in the UK as part of its growth plans. The report added that the bank was expected to start operations in the first quarter of 2020.

Initially, JN Bank UK aims to find clients from among the Caribbean diaspora and those with affinity to them. But, over time, it plans to offer deposit and savings and loan products to the wider UK market.

“The group continues to chart new paths, as this will be the first time that a Caribbean bank will be established in the UK,” said JN.

It also disclosed that the regulatory business plans had been accepted by both the UK and Jamaican regulators, that the bank’s management team was in place, IT systems were being developed, and administrative, accounting and marketing programmes were well advanced.

The UK regulator lists nine key personnel at JN Bank UK, led by James Jaiparkash Bawa as its CEO, Matthew James Ellis as money laundering reporting officer and compliance oversight officer, Dean Fensome as chief of finance, and Hugh Jones as chief of risk.

A JN manager, who spoke on condition of anonymity, affirmed the historic significance of the group becoming one of the first Caribbean entities to operate a bank in the UK, but also highlighted its pragmatism, saying it would allow JN to engage in cross-border banking transactions without having to depend on an outside intermediary bank.

In recent years, banks in North America and Europe have been on a drive to reduce the risk of money laundering and terrorism flows in cross-border transfers, a process that came to be known as derisking, under which the foreign banks cut ties with financial institutions in the region, while some were subjected to more stringent compliance measures.

JN said this increased compliance has cost the group more than US$5 million since 2015, and that the correspondent banking crisis significantly increased its cost of operation. The JN representative offices and remittance company, JN Money Services Limited, experienced a 42 per cent increase in banking costs in the UK over four years, while in The Cayman Islands, the cost rose by more than 1,000 per cent over the past five years, the group stated in the annual report.

“At Jamaica National, we have struggled to maintain correspondent banking relationships for JN Bank …,” the report noted.

“Therefore, the company spent an alarming £2.3 million and CI$2.8 million since they lost correspondent banking services in both markets, while applying very limited increases in their transaction fees. These increased costs could not be passed on to customers, as it would make the remittance entity uncompetitive,” JN added.

As a result of the added costs to the business, as well as the new uncertainties for foreign banking relations under Brexit, JN Group said it began exploring the option of operating its own commercial bank in the UK market.