Starting next year, Bahamians investing in foreign securities and other capital market products will be able to complete their transactions through commercial banks, rather than having to do so directly through The Central Bank of The Bahamas (CBOB).
This is a continuation of the bank’s rollout of a series of policies to further liberalize exchange control in The Bahamas.
In a statement, the regulator noted that although it will cease to sell or buy investment currency directly to or from the public, the new investment currency market (ICM) framework will transfer a portion of the premium on sales to authorized dealers (which are commercial banks), while retaining full liability for premium on ICM redemptions, or capital repatriated to The Bahamas, with the Central Bank.
“Except where approval is granted by the Central Bank for investments to be funded at the official rate of B$1.00=US$1.00, the public must buy the required foreign exchange at a premium of 5 percent above the official rate,” the regulator explained.
“On repatriation of the capital to The Bahamas, investors may convert their proceeds into local currency at a premium of 2.5 percent above the official rate. However, profits and income associated with the repatriation must be converted at the official rate.”
Once investors provide evidence of exchange control approval, authorized dealers will be allowed to accommodate a selling rate of B$1.05=US$1.00 and a buying rate of B$1.025=US$1.00, the regulator noted.
In terms of the sale and redemption of investment currency on a net settlement, the rate for selling increases to B$1.035=US$1.00, while the rate on bids to buy remain the same, B$1.025=US$1.00.
The bank pointed out, however, that there are some exceptions to the investment currency rates that can instead be financed at the official rate, including real estate purchases for personal use or immediate family use, up to a value of $0.5 million; and the direct establishment of a business abroad (or in the international sector), or acquisition of similar business interests, where the investment would positively impact The Bahamas’ balance of payments through generation of returns for repatriation to The Bahamas.
However, an annual limit of $2 million per investor or entity applies, subject to an overall transactions cap of $10 million per investor group, every three years, the regulator noted.
Additionally, securities purchased and marketed by Bahamas licensed broker dealers as depository receipts, under the aggregate annual limit that applies to broker dealers of $35 million, or up to 5 percent of the external reserves as at the end of the previous year, can also be financed at the official rate.
Foreign exchange transactions for investment currency are still subject to government stamp tax and other commercial bank charges that might apply, the regulator noted.
“The investment currency market facilitates the buying and selling of foreign securities by Bahamian residents such as equities and bonds and other capital market products,” the bank states.
“Direct ownership of real estate and business interests outside The Bahamas must also be channeled through the ICM when the investments value exceeds the thresholds that can be funded at the official rate.”
The policy takes effect January 1.