VICTORIA MUTUAL BUILDING SOCIETY: TAKING STOCK
CASE STUDY SOLUTION
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SYNOPSIS
In 2012, the Jamaican economy was in a crisis. It had an estimated debt-to–gross domestic product (GDP)
ratio of 147 per cent. To alleviate the crisis, the Jamaican government signed both an extended fund facility
for US$948 million, in 2013, and a precautionary stand-by arrangement for US$1.64 billion, in 2016, with
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the International Monetary Fund (IMF). As a condition of the IMF loan, the Jamaican government agreed
to an economic reform agenda with requirements that included the harmonization of prudential standards
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across all deposit-taking institutions (DTIs) and consolidated supervision. Consequently, in 2014, the
Government of Jamaica passed the Banking Services Act (BSA), which became effective September 30,
2015. Prior to the BSA, the financial services sector was fragmented. Banks and DTIs were regulated by
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the Bank of Jamaica (BoJ), Jamaica’s central bank; building societies, though supervised by the BoJ, were
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The Case Solution Starts From page 6
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ASSIGNMENT QUESTIONS
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1. Discuss the efforts by the Bank of International Settlements (BIS) to create and coordinate
internationally accepted banking regulations.
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2. What is your assessment of the general environment of the financial industry in Jamaica? What
observations can be made regarding the competitive dynamics in the industry?
3. What are the main differences between a mutual company like VMBS and a stock company? How do
these differences restrict the growth of VMBS?
4. Evaluate the options open to VMBS, and advise Courtney Campbell on which option is best for the
company. What role should the owners of VMBS play in the decision-making process?
5. Use Drucker’s Theory of the Business to determine how the business would change (if at all) based on
your previous decision.
The Case Solution Starts From page 6
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ANALYSIS
1. Discuss the efforts by the Bank of International Settlements (BIS) to create and coordinate
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internationally accepted banking regulations.
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Before 1988, banks were generally self-regulated. However negative shocks to the financial system
repeatedly uncovered new problems in the banking industry, and regulators sought to correct these.
Increased globalization resulted in global interconnection, which meant that bank failures in one country
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could negatively affect other national economies. In addition, internationally coordinated regulations help
to minimize competitive differences among national banking system.
So
In 1974, the Basel Committee (formerly the Committee on Banking Regulations and Supervisory Practices)
was established by the governors of the central banks of the Group of Ten (G10) countries. The committee,
headquartered at the BIS in Basel, Switzerland, was established to enhance financial stability by improving
the quality of banking supervision worldwide and to serve as a forum for regular co-operation between its
The Case Solution Starts From page 6
, EXHIBIT -1: VICTORIA MUTUAL BUILDING SOCIETY—SWOT ANALYSIS
Strengths Weaknesses
• VMBS is well established, with 143 years’ • Limited Growth: The building society’s
history, a good reputation in the market, a secured lending and savings business
strong brand name, and a well-integrated represents approximately 75 per cent of
financial base. the group’s profitability.
• •
.
•
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Opportunities Threats
• Less than 10 per cent of the Jamaican • The National Housing Trust (a public
market has mortgages. savings and loan agency) has grown to
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• approximately 50 per cent of the mortgage
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market.
•
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So
The Case Solution Starts From page 6
, EXHIBIT -2: PORTER’S FIVE-FORCES MODEL
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The Case Solution Starts From page 6
CASE STUDY SOLUTION
e
pl
m
Sa
SYNOPSIS
In 2012, the Jamaican economy was in a crisis. It had an estimated debt-to–gross domestic product (GDP)
ratio of 147 per cent. To alleviate the crisis, the Jamaican government signed both an extended fund facility
for US$948 million, in 2013, and a precautionary stand-by arrangement for US$1.64 billion, in 2016, with
n
the International Monetary Fund (IMF). As a condition of the IMF loan, the Jamaican government agreed
to an economic reform agenda with requirements that included the harmonization of prudential standards
tio
across all deposit-taking institutions (DTIs) and consolidated supervision. Consequently, in 2014, the
Government of Jamaica passed the Banking Services Act (BSA), which became effective September 30,
2015. Prior to the BSA, the financial services sector was fragmented. Banks and DTIs were regulated by
lu
the Bank of Jamaica (BoJ), Jamaica’s central bank; building societies, though supervised by the BoJ, were
So
The Case Solution Starts From page 6
, e
pl
m
Sa
n
tio
ASSIGNMENT QUESTIONS
lu
1. Discuss the efforts by the Bank of International Settlements (BIS) to create and coordinate
internationally accepted banking regulations.
So
2. What is your assessment of the general environment of the financial industry in Jamaica? What
observations can be made regarding the competitive dynamics in the industry?
3. What are the main differences between a mutual company like VMBS and a stock company? How do
these differences restrict the growth of VMBS?
4. Evaluate the options open to VMBS, and advise Courtney Campbell on which option is best for the
company. What role should the owners of VMBS play in the decision-making process?
5. Use Drucker’s Theory of the Business to determine how the business would change (if at all) based on
your previous decision.
The Case Solution Starts From page 6
, e
pl
m
Sa
ANALYSIS
1. Discuss the efforts by the Bank of International Settlements (BIS) to create and coordinate
n
internationally accepted banking regulations.
tio
Before 1988, banks were generally self-regulated. However negative shocks to the financial system
repeatedly uncovered new problems in the banking industry, and regulators sought to correct these.
Increased globalization resulted in global interconnection, which meant that bank failures in one country
lu
could negatively affect other national economies. In addition, internationally coordinated regulations help
to minimize competitive differences among national banking system.
So
In 1974, the Basel Committee (formerly the Committee on Banking Regulations and Supervisory Practices)
was established by the governors of the central banks of the Group of Ten (G10) countries. The committee,
headquartered at the BIS in Basel, Switzerland, was established to enhance financial stability by improving
the quality of banking supervision worldwide and to serve as a forum for regular co-operation between its
The Case Solution Starts From page 6
, EXHIBIT -1: VICTORIA MUTUAL BUILDING SOCIETY—SWOT ANALYSIS
Strengths Weaknesses
• VMBS is well established, with 143 years’ • Limited Growth: The building society’s
history, a good reputation in the market, a secured lending and savings business
strong brand name, and a well-integrated represents approximately 75 per cent of
financial base. the group’s profitability.
• •
.
•
e
•
pl
•
m
Sa
Opportunities Threats
• Less than 10 per cent of the Jamaican • The National Housing Trust (a public
market has mortgages. savings and loan agency) has grown to
n
• approximately 50 per cent of the mortgage
tio
market.
•
lu
So
The Case Solution Starts From page 6
, EXHIBIT -2: PORTER’S FIVE-FORCES MODEL
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pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
