While the financial sector’s expenditure in the economy expanded in 2018, pressure from international regulators has resulted in employment retrenchment, according to the Central Bank of The Bahamas (CBOB).
The injection into the economy from financial services rose by 7 percent during 2018, with total expenditure increasing to $760.1 million, reflected mainly in operational costs. That increase was attributed mostly to non-staffing expenses, given a decline in employment in the banking sector due to entities outsourcing operations and consolidating business lines.
“Specifically, survey data showed that total employment declined by 80 (1.9 percent) to approximately 4,049 persons in 2018, after a 3 percent falloff a year earlier, and an average 3.6 percent contraction over the 2013-2017 period,” notes the report entitled “Gross Economic Contribution of the Financial Sector in The Bahamas”, released by CBOB on Tuesday.
“In particular, the number of Bahamian employees decreased by 62 (1.6 percent) to 3,800, while the non-Bahamian segment fell by 18 (6.7 percent) to 249. As a consequence, the share of Bahamian employees in the sector edged-up by 32 basis points to 93.9 percent at end-December, compared to the same period in 2017, while the share of the non-Bahamian component declined to 6.1 percent.
“A breakdown by activity, showed that an estimated 63.9 percent of Bahamian staff were employed in the local banking sector, 16.5 percent in offshore banking, 12.7 percent in trust administration and 6.8 percent in other wealth management-related activities.”
While the banking sector, which dominates the financial services industry, saw an overall decline in employment, on the domestic banking front, total employment increased by 1.6 percent.
It was the international banking sector which saw the largest number of redundancies, with employment decreasing 13 percent.
As a result, the ratio of Bahamian to non-Bahamian employees narrowed to approximately 47:2 in 2018 from 57:1 in 2017.
“For international businesses, the response to tax transparency requirements has exacerbated operating cost pressures, culminating in both the repositioning of business outside the jurisdiction and significant outsourcing of support for the remaining operations,” CBOB notes.
“In this regard, The Bahamas continued to experience employment retrenchment in international banking, notwithstanding an increasing expenditure footing for domestic banking.”
Although the domestic banking sector’s contribution to the economy increased 10 percent to $511.1 in 2018, compared to the international sector which firmed by 1.3 percent to $249 million, average base salaries in the international sector remained higher than those offered in the domestic sector.
“Specifically, the average compensation of the international banks rose by an estimated $5,218 (4.9 percent) to $111,129 per annum in 2018, due mainly to a decline in lower paid administrative-related staff. In addition, the average salary of the domestic banks firmed by $3,261 (6.2 percent) to $56,289 per annum,” the bank notes.
This disparity is due in part to the emphasis placed on employing high-skilled workers to offer a variety of wealth management services in the international banking sector.