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Central Bank bill passed along with other regulatory bills

Parliamentarians yesterday debated and passed a compendium of bills aimed at enhancing governance and the transparency in The Bahamas’ monetary policy and fiscal responsibility framework.

The Central Bank of The Bahamas Bill, 2020; The Banks and Trust Companies Regulations Bill, 2020 and The Protection of Depositors (Amendment) Bill, 2020 address financial sector crisis management and the acceleration of the development of the domestic payment systems. It also modernizes the payment and settlement system while providing relief and recourse for the Central Bank to act in the event that financial institutions find themselves in difficulty.

As he started debate on the bills in the House of Assembly yesterday, Deputy Prime Minister and Minister of Finance Peter Turnquest said the bills are making the domestic monetary and financial sector policy institutions more transparent, with enhanced government arrangements.

“This is a credibility enhancing signal for both domestic and international stakeholders,” he said.

In addition to making The Central Bank of The Bahamas the sole resolution authority for failing banks, the bills introduce several new provisions designed to compliment and support the reformed proposals through the financial crisis management framework.

Noting that the failure of financial institutions can pose systemic risks to the stability of the financial system and lead to significant financial loss, Turnquest said these reforms were particularly important.

“There is also important

emphasis on domestic payment system modernization. The Central Bank provides a framework for both the issuance and regulation of a Bahamian central bank digital currency. The Sand Dollar, as the instrument, has been called in the pilot phase underway, will provide [a] digital payment infrastructure. It will permit all supervised domestic institutions to provide digital financial services on a nationally integrated platform, in so doing, it will promote accelerated outcomes for financial inclusion and access to financial services and will offer a platform for domestic innovation,” he said.

“This is a revolutionary, innovative development, as we know that many in our Family Islands, particularly those in the far south, do not have access to brick and mortar financial institutions. So, the introduction of this digital currency is going to provide significant opportunity for financial inclusion by those persons who may be so disadvantaged. That is important for economic development, because as we know, without the ability to transact business electronically, it provides an effective barrier to the opportunity to transact international business. As simple as reservations at a resort or a small bed and breakfast in the Family Islands.”

The Protection of Depositors (Amendment) Bill, 2020, seeks to not only enhance depositor protection, but also the corporate governance framework of the Deposit Insurance Corporation (DIC). The bill also seeks to reduce the time within which the DIC must make payouts to depositors following the failure of a member institution; and includes co-operative credit unions in the membership of the Deposit Insurance Fund.

The DIC is financed by annual premiums levied on its 11-member financial institutions, which covers the client deposits of those institutions in the event that a bank or financial institution is forced to close.

The amendments also make membership in the DIC compulsory for those co-operative credit unions.

Additionally, the bill provides for an increase in the annual premiums payable by members of the fund from one twentieth of one percent to one tenth of one percent of the insured deposits.

Provisions are also made in the bill to authorize the minister of finance to lend funds from the Deposit Insurance Fund to the DIC.

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