With the recent announcement of a major international financial group closing its Bahamian center, another engaging in a rightsizing exercise, and at least one more departure on the horizon, The Bahamas will continue to see hemorrhaging in the financial services sector, according to an industry stakeholder.
Group Chief Financial Officer of Fidelity Bank & Trust International Limited Gowon Bowe said in the past three to four years, various moves by the Organization for Economic Co-operation and Development (OECD) and the European (EU) have made it very difficult for financial services operations in The Bahamas.
“Most of our private banking subsidiaries that are operating in The Bahamas are subsidiaries of European companies, mostly out of Switzerland and several are out of Italy and France. Ultimately, when the tax laws in Europe started changing, the traditional base of that clientele are Europeans that are opening up accounts in an international financial center, at the time purely above board in the sense of going to jurisdictions that did not have income tax or certainly lower tax brackets than in their own jurisdictions,” he explained.
And with the anonymity of private banking that was prevalent 15 years ago now gone, due to the stringent regulations, The Bahamas has to redefine its value proposition, Bowe said.
“Wealth management, which is the additional arm of the subsidiaries that are in The Bahamas as a service, has not died but the actual nature of how those services are provided has changed radically. With the traditional client base being eroded have we been able to pick up new client bases in new jurisdictions? The answer has obviously been no,” he said.
“So, as it relates to should there be alarm, I think the alarm was sounded… way back in the early 2000s and the clarion call has only gotten louder and louder. In the absence of redefining our value proposition, we are going to be faced with a situation that, operations which have a Bahamian subsidiary, are going to be looking at the cost of the operations relative to the money they can earn.”
Last week, Swiss wealth management company Julius Baer announced it is closing its New Providence booking center, as the company addresses margin pressure.
Private Investment Bank Limited (PIBL) also announced last week that it is streamlining its operations in The Bahamas.
The moves prompted
Opposition Deputy Leader Chester Cooper to question what the future holds for the offshore financial services industry in The Bahamas.
He urged the government to act now, as financial institutions are pivoting from The Bahamas to the Latin American market.
“So what you have found is the traditional customer base being European customers has been significantly eroded, certainly more aggressively in the last five to seven years. If the client base of a lot of these subsidiary companies in The Bahamas are European clients and they did not reinvent themselves to target new client bases, we’re not going to be as impactful like South America, like Asia… The writing on the wall in terms of their existence under the current model has long been on the wall,” Bowe said.
“The reality is – we speak about it through the Bahamas Financial Services Board and the Ministry of Financial Services – The Bahamas has to redefine its value proposition. Many years ago, going back to the early 2000s, with the advent of the blacklistings, private banking in terms of anonymity has been eradicated… Confidentiality still exists, but not anonymity.”