Business

Financial services sector continues to shrink

Financial institutions decline to 217, total assets drop to $173.2 bil.

The financial services sector continued to shrink in 2020, with the number of institutions declining to 217 and total assets dropping to $173.2 billion.

It’s a continuation of a five-year trend which saw consistent leakages in the sector. Comparatively, there were 221 institutions in 2019, 231 in 2018 and 249 in 2015. Assets in 2019 were $186.6 billion and in 2015 they stood at $262 billion.

Employment in the financial services sector dropped to 3,843 in 2020, compared to 4,0001 in 2019 and 4,366 in 2015.

Despite this decline in the sector, Central Bank Governor John Rolle said there has been some growth in the public bank and trust companies segment, which currently is comprised of 84 financial institutions.

“We’ve seen some gradual interest in private trust companies, which is a relatively new construct within the bank and trust companies regulation framework, so that is an area with growth,” he said.

“But that doesn’t necessarily translate into on-the-surface growth in the level of employment and other shifts that one would see in the core operations. In the core operations of the banks and trust companies, what has really been driving trends is the global shift in the tax compliance regime, we believe more so than even the AML (anti-money laundering) and other pressures in the sense that clientele in many cases are going back to the European or OECD (Organisation for Economic Co-operation and Development) home countries for tax compliance reasons. So that has led to a lot of the investments which we continue to see.”

Rolle said at the same time, financial institutions are seeing very satisfactory business growth in some new markets such as in Latin America.

“So I think that bodes well for potential future opportunities, but it also hints at the ongoing need to
monitor how one adjusts to the tax compliance mandates,” he said.

The local financial services sector has been under considerable pressure in recent years, as international regulatory bodies impose ever-shifting global standards.

The government has placed significant legislative focus on compliance to ensure this jurisdiction avoids or is removed from black and grey lists.

Speaking to the regulatory pressures, Rolle said, “Part of this we have to always appreciate as an industry is that we export financial services and a large amount of our standards and our approach is to make certain that our jurisdiction lines up with the global assessments. So that drives a considerable amount of the regulatory structure that we have.

“Nevertheless, one of the focuses that the Central Bank has in its medium-term work plan is to be truthful to the principals behind the intent of the global standards and to look at how the Bahamian application can be simplified, because often depending on the complexity of the market, the rules sometimes need not be as lengthy and some of the reporting requirements can be simplified.”

The recently released Global Financial Centers Index 29 (GFCI 29), which is compiled each year by Z/Yen Partners in collaboration with the China Development Institute, showed that The Bahamas dropped four rankings in terms of financial services to 73 this year.

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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