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Central bank report: Financial sector continues to record declines

The financial sector continues to face declines in the number of banks and employed people in 2018, and the sector’s total domestic assets also declined in that year, according to the Central Bank of The Bahamas’ (CBOB) Gross Economic Contribution of the Financial Sector in The Bahamas 2018 report.

The report reveals that the financial sector has faced continued declines over the past five years, with added pressure being placed on the sector by international financial services regulators such as the Financial Action Task Force (FATF).

“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,” the report states.

In terms of employment in the sector, the report explains that overall employment has been on a declining trend. However, when the employment data is disaggregated, the domestic banking sector had improved numbers on the employment side in 2018.

“Survey data showed that total employment declined by 80 (1.9 percent) to approximately 4,049 persons in 2018, after a three percent falloff a year earlier, and an average 3.6 percent contraction over the 2013-2017 period,” the report states.

“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 the end of December, vis-à-vis the same period in 2017, while the non-Bahamian component declined to 6.1 percent.”

Despite declines, the report explains that the banking sector continues to dominate the “financial landscape in terms of employment”.

The report also notes that the ratio of Bahamian to non-Bahamian employees in the financial sector narrowed to 47:2 from 57:1 in 2017.

The central bank report also notes that banks continue to face challenges with the important correspondent banking relationships (CBRs) with international counterparties.

In terms of the number of financial institutions, the report notes a slight decline in 2018, though declines have been a multi-year trend.

“The total number of banks and trust companies licensed in The Bahamas declined by 11 to 231 in 2018, following a decrease of 6 in the prior year,” the report states.

“The largest reduction occurred in the restricted, non-active and nominee licensees’ category, by 10 to 142, while the number of public banks and trust companies decreased by just 1 to 89. At the end of December, public licensees consisted of 54 Bahamian incorporated entities, 15 euro currency branches of foreign banks, 12 authorized agents (trust companies) and eight authorized dealers (commercial banks).”

The total domestic assets in the banking sector saw a softening by 2.4 percent to $10 billion in 2018, after an expansion the year before by 2.3 percent.

The assets in the international banking sector decreased by 1.4 percent to $166.1 billion, after a 2.1 percent increase in 2017.

“However, over the last five years total assets contracted by 9.8 percent, as firms continued to consolidate their operations amid declining business prospects,” the report notes.

The report contends that the near-term survival of the financial sector hinges on the country’s ability to strengthen the “competitive profile of the sector”.

“For some business models, this has meant increasing the attention on markets outside of the major industrial countries, with strengthened focus on attracting tax-compliant clientele,” the report points out.

“The quality of the regulatory regime is also impacting upon the sector’s prospects, with ongoing priority particularly to enhancing mechanisms for international tax transparency, and improving The Bahamas’ risk rating profile for countering money laundering, terrorist financing and other illicit activities.”

Chester Robards

Senior Business Reporter at The Nassau Guardian
Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian.
Education: Florida International University, BS in Journalism
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