The pool of banking and trust companies licensed to operate from within The Bahamas continued to shrink in 2005 as a result of the enforced regime which requires those institutions to have a physical presence here.
The Central Bank of The Bahamas' newly released Annual Report for 2005 reported that there were 250 of those licensed bank and trust companies operating locally, a decline of 16 compared to the year before. The report also stated that the number of public licensees decreased by 8 to 149 and restricted and non-active operations declined by 8 to 101.
The Government of The Bahamas enacted legislation in December 2000 which placed additional requirements on the operators of offshore banks and trust companies in the country because of the international sparked by worries about money laundering.
As of June 30, 2004, expect for special managed arrangements approved by the Central Bank, all remaining licensees were required to have met the physical presence stipulation.
"The Governor granted 9 new licenses, which reflected continuing mergers and rationalizations among existing banks and the closure of a few remaining "managed" banks, which had chosen not to take up a physical presence in The Bahamas," the report noted.
As a part of the new regime, the Central Bank currently conducts integral on site inspections to ensure that the operations are following guidelines.
The bank conducted 39 such inspections in 2005, according to the latest data released, a significant number of which focused on ensuring that banks which had switched from being managed by other licensees had successfully established a physical presence in The Bahamas.
The inspectors operate under risk adjusted guidelines in determining which institution should be examined, taking into account factors such as the nature of the licensees business and its previous record on safety and soundness.
According to the 2005 Annual Report: "The outcome of the physical presence examinations was broadly satisfactory, with most of the subject banks showing a satisfactory transition to the new regime."
Managed banks operating under a physical presence in The Bahamas must have a minimum of one resident officer, or employee who is able to take an active interest in the affairs of the entity who must be approved by the Governor of the Central Bank. Additionally, two senior resident officers must be approved to be responsible for the licensee's operations in The Bahamas.
A Compliance Officer and a Money Laundering Reporting Officer are also required.
Historically, the banking and trust company sectors have been the dominant feature of offshore financial centers here. At mid-October 2002, there were 310 licensed institutions, of which 123 held combined banking and trust licenses, 80 held only a banking license, and 107 were authorized solely to undertake trust business.
Back then, in total, 198 institutions were entitled to conduct a wide range of business under a public license, while the remainder were either restricted to varying degrees in the scope of their activities under the terms of the license or were inactive.
During the year, the Central Bank also kept the lending portfolios of domestic banks under review. Analysts determined that growth in domestic credit accelerated to $672 million from $253 million in 2004 and $33 million in 2003.
A strengthened expansion in Bahamian dollar credit and loans for tourism developments are said to have boosted foreign currency landing by 14 percent.
Personal loans, which accounted for the largest private sector claims, increased by 14 percent and subsequently impacted an almost two fold hike in consumer credit and extended growth in housing loans.
According to the figures, lending for a consolidation of debt lead the way in disbursements, followed by credit cards, home improvements and furnishings and domestic appliances.
By: Tameka Lundy, The Bahama Journal
