Banking institutions in The Bahamas can expect on-site inspections from January 29 onwards as a result of the recent overhauling of the country's financial sector to bring it into line with best international standards and regulations. In addition to on-site inspections, banks can also expect to come under cross-border examination from foreign regulatory bodies.
Reported by The Nassau Guardian, Central Bank Governor of The Bahamas, Julian Francis, said: 'The Bahamas is in the midst of a significant revamping of much regulation of our financial sector. The period 2000/2001 will represent in many ways an important turning point.'
The Governor was speaking at a workshop being hosted this week by the Central Bank of The Bahamas and the Financial Stability Institute (FSI) to discuss the subject of a 'new international system for determination of banks' capital.' The FSI is associated to the Bank for International Settlements (BSI) based in Basel, Switzerland, of which The Bahamas is also a member.
During this week's event, presentations will be made by the heads of central banks, deputy governors and banking supervisors from the international community including the UK, Japan, the US, and the Caribbean Region.
Mr Francis told the workshop delegates that the new BIS Capital Accord would be introduced in three years time to provide the 'methodological flexibility' that is required in the process of the determination of capital requirements. He said: 'This seminar will no doubt allow us an in-depth view of the enhancements to the existing capital accord and techniques in consolidated supervision.'
The New Basel Capital Accord focuses on minimum capital requirements, which seek to refine the measurement framework set out in the 1988 Accord, supervisory review of an institution's capital adequacy and internal assessment process, and market discipline, through effective disclosure to encourage safe and sound banking practices.
The original Accord, Basel One, said Francis, was twelve years old and had become limited in its capacity. The focus of the 1988 Accord was initially on internationally active banks, but it since has been adopted by more than 100 countries. Although he welcomed the new Accord he warned that financial institutions should be prepared for the 'enormous' challenges that may lay ahead, saying, 'the relative inexistence of well established securities markets and credit assessment agencies within our economies compared with the developed countries, will therefore tax importantly our still developing supervisory resources in making good use of these tools.'
'We have,' he continued, 'to be keenly aware of the shortcomings with which we will need to grapple to make these tools relevant to our requirements, and the consequent critical value of workshops such as this one.' However, Francis said the necessary adjustments to be made by the The Bahamas' international financial services sector under the second Accord ensured its future would be a 'highly optimistic' one.
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