Michael L. Paton
Bahamas Financial Services Board
2002 will undoubtedly be regarded as a seminal year for the financial services industry of The Bahamas. In January, The Bahamas signed a Tax Information Exchange Agreement with the United States of America. This act of political expediency ensured The Bahamas maintained its Qualified Jurisdiction status for US withholding taxes, which is vital for the private wealth management sector of the financial services industry in The Bahamas. In March, The Bahamas issued a conditional commitment to the OECD to enter into Tax information Exchange Agreements, similar to the one entered into with the USA. The condition precedent is a level playing field amongst all OECD countries and those non-OECD countries with which The Bahamas competes in financial services.
The Bahamas Government has recently reiterated this requirement and accordingly the OECD initiative may have been technically knocked out, at least for the time being. The end result of this is that the country is not on any supranational “blacklists”, which is important for the continued viability of The Bahamas as a financial center.
There are several storms on the horizon, however, which will have to be closely tracked, including the proposed FTAA agreement and its impact on financial services.
The financial services industry in The Bahamas has had to critically examine itself over the past twelve months. The government has evidenced its commitment by the establishment of the Ministry of Financial Services and Investments and has committed itself to regulatory transparency and responsiveness. The private sector has determined that it will continue to focus on private wealth management and investment funds, whilst seeking opportunities in corporate services such as those presented by the securitization sector.
2003 should be a very active year for The Bahamas financial services industry. The short-term legislative agenda contemplates, inter alia, new investment funds legislation, foundation legislation, protected cell legislation and netting and set off legislation.
The purpose of the proposed new legislation is to demonstrate that The Bahamas is an attractive jurisdiction for the domiciliation of investment structures and that Bahamian law provides certainty and clarity with respect to these structures.
The private wealth management sector of the financial services industry is in the middle of a significant transition period. Within private banking the emphasis is now shifting to investment management, which generates significant fees for private banks. The new model of private banking includes a variety of structured banking products, which facilitates access to investment products hitherto unavailable to the majority of private banking clients. The Bahamas is well positioned as a domicile for these structured products and they represent an immediate opportunity for the jurisdiction.
In the Investment Funds sector, The Bahamas continues to attract substantial new business, with assets in investment funds of approximately $100 billion. The new Investment Funds Act, foreshadowed by the Ministry of Financial Services and Investment to be passed in 1st quarter 2003, should further strengthen the sector.
The Bahamas Financial Services Board will actively promote The Bahamas via participation at recognised industry conferences and continue briefing visits with key intermediaries with the objective of raising the profile of The Bahamas – and to show that The Bahamas is indeed open for business and that we are a proactive, first class financial centre that is committed and well-equipped to offer high quality financial services to the international marketplace.