Central Bank Governor John Rolle said he welcomes the new streamlined, administrative process in collecting fees from financial institutions and the autonomy being given to the regulatory body to assess their business models.
Last week Deputy Prime Minister and Minister of Finance Peter Turnquest announced that rather than paying business license fees, financial institutions will have supervisor fees levied against them, payable to The Central Bank of The Bahamas (CBOB) which would collect and then deduct its cost of regulation, as well as those on behalf of the Securities Commission of The Bahamas, the Compliance Commission, the Insurance Commission of The Bahamas and the Financial Intelligence Unit, and remit the excess to the government.
Rolle said while the administrative consolidation is notable, the more important reform is the regulatory consideration CBOB now holds.
“Another significant proposal the government is hinting at is that from a policy point of view, you’re leaving it up more to the regulators to assess the business model proposals of the financial institutions and then to decide whether it is justified enough for them to operate, say, strictly international versus international and domestic,” Rolle said in an interview with Guardian Business.
“But the policy up to this point in the past has been that if an entity came in to operate internationally it was strictly a regulatory decision, but if the entity operated in the local sector you were always to consider the government’s direct views or participation in the domestic banking system.”
“But it’s still a regulatory consideration where you have to look at how you manage the orderly functioning of the financial system, so those considerations will go into how persons enter or leave the local sector.”
Doing away with the business license fees is expected to reduce the risk of ring fencing and preferential treatment for international financial entities, now subjecting all banks with Bahamian dollar liabilities of over $100 million to a levy of 0.3 percent per year.
“Now they pay business license and some other fees, so it means that they were paying fees to the central bank which made it to the government, and they were paying to the business license office which made it to the government,” Rolle said.
“In terms of consolidating where they make their payments and how the assessments are being done that was a big part of the change, and relating it directly to the fact that there is a certain level of regulatory effort and oversight in dealing with different categories of banks, so that has always been reflected in the fee structure for banks, but this is a more streamlined approach.
“But even though we’ve always reflected that fact that certain categories of institutions require more effort to supervise, we never really put the caption on it as such to say that your cost structure is one way or the other for certain reasons.”