Bahamas: Central Bank's Role To Expand

Mandy Robinson, Tax-news.com, London

23 August 2000

In the wake of recent amendments to legislation that will bring the Bahamas into line with international regulatory standards, the Prime Minister Hubert Ingraham has announced further reforms, and this time the country's financial institutions will be in the spotlight.

In the push to align the country's financial sector with the Government's new legal regime, Mr Ingraham has declared that changes will be made to the legislation that governs investment and finance operations. The Governor of the Central Bank will be afforded more responsibility for vetting companies who apply to provide banking services.

Although the Prime Minister is quick to point out that the government does not wish to encroach upon the Central Bank's autonomy, he is quoted by the Nassau Guardian as stating that 'the government of the Bahamas has been very careful to keep its distance from the Central Bank, to permit them to operate autonomously without interference from the government and we will continue to do that, except that we will be a little bit more interested in how they discharge their functions because at the end of the day, it will be us and the Bahamas who receive the discredit for whatever happens.'

In the article, Mr Ingraham states that the Central Bank Governor will be granted the authority to refuse bank and trust company licenses upon the basis of the applicant's status. He said: 'The Governor now has power to refuse a bank or trust company license if he determines that it is in the public's best interest to do so ...but I want to give him more power so that he can deny applications if he determines that the applicant is not a fit and proper person to transact business in the Bahamas without any consequences.'

The PM also said that the government expects the Central Bank to implement stricter rules in its dealings with managed banks. The Nassau Guardian reports that the new rules will ensure that banks can not operate in the Bahamas unless they 'are subject to the supervisory oversight of some institution be it in the Bahamas or their home country', and the Prime Minister is adamant that banks can no longer avoid 'supervisory oversight', as they have been doing, on the basis that bank secrecy operates in the Bahamas.

The Prime Minister goes on to explain that 'we know that we have the managed banks in the Bahamas which do fall through the cracks, that is, they are not subject to real supervision either by the Central Bank of the Bahamas or their home countries ...we also know that the BASLE Committee is of the view that no financial institution should be able to avoid regulation and supervision by some supervisory authority be it a home supervisory authority or alternatively, the host country supervisory authority.'

Further changes will also be made to impose limits and restrictions on the number of shell banks and brass plate banks in the Bahamas. That is, unless they are connected to organisations in the country that are owned by respected groups or if they meet other standards and are willing to become established resident institutions within a certain amount of time.

Mr Ingraham does not expect any legitimate concerns over the reforms, from either banks, customers or their intermediaries, because they are simply being brought into line with international standards of transparency: 'We will seek to cut no new ground, but we will seek to be in full compliance with the rules ... quite frankly, if anyone cannot live with these rules, I would have to seriously question what kinds of businesses they are conducting.'

Furthermore, the Bahamas government has made enquiries into recruiting people to assist in the supervision and regulation of the finanical sector. The IMF, the Canadian government, and various financial institutions based in the Bahamas have assisted the Bahamians in seeking staff to join the supervisory division of the Central Bank. Their efforts to do so have been described by Prime Minister Ingraham as 'most helpful.' Speaking of the new employees, Mr Ingraham insists that 'we are going to put into law what their duties are as supervisors. We are going to have a yardstick by which they are measured. We are also going to clearly establish their duty to cooperate with other supervisory authorities around the world so that never again will it be written that the Bahamas' supervisory authorities do not cooperate with other international supervisory authorities.'

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