Adding to the offsite surveillance and onsite inspection pillars of its supervisory and regulatory framework, the Bank Supervision Department of the Central Bank of The Bahamas also has a dedicated Policy Unit. The CBB is committed to ‘transparent and consultative approach’ to policy development and, as such, the Unit is mandated to:
· develop proposed legislation, regulations, guidelines and internal procedures relating to regulation and supervision of banking institutions; coordinate and consolidate industry feedback on proposed legislation, regulations and guidelines and liaise with government departments responsible for writing legislation;
· assess representations from licensees which involve legal precedents and/or require rulings of a legal nature involving product or operational situations, and make recommendations to the Governor to ensure that a consistent approach to precedents and rulings is provided to the industry; and maintain a database of approved rulings and precedents for use by the Department’s staff when dealing with licensees;
· provide, on the basis of research and analysis, information to support regulatory and supervisory processes and, where appropriate, make recommendations to enhance current legislation;
· monitor and coordinate the licensing of banking institutions, to ensure conformity with domestic and international established rules and requirements. (Individual portfolio managers and senior officers of the Bank Supervision Department are responsible for the analysis of individual applications);
· coordinate the development and administration of MOUs with international regulatory bodies, coordinate international visits and assessments relating to Bank Supervision and participate, when required and appropriate, in international fora to ensure that The Bahamas’ position is well understood and acknowledged.
Policy documentation produced include:
· Comprehensive Guidelines for Licence Applicants and Enhanced Fit and Proper Requirements;
· Managed Licensee Guidelines
· Physical Presence Guidelines
**Shell Banks Discontinued**
Over three years ago, The Bahamas committed to the discontinuance of shell banks. The referenced Managed Licensee Guidelines include:
-guidelines for the requirements for the transition of management banks to full physical presence;
-guidelines with respect to the requirements for the continuation of the management of branches of foreign banks (currently without a physical presence); and
-guidelines with respect to the requirements for the continuation of the management of restricted banks and trust companies (currently without a licence).
The Physical Presence Guidelines relate to the minimum physical presence requirements for banks and trust companies licensed in The Bahamas.
At the end of last year, only 22 entities were still classified as “managed” subsidiary and stand-alone institutions, with only 3 “managed” bank and/or trust branches of foreign banks. The regulatory authority says the transition process has been monitored closely, noting the June 30, 2004 deadline for all licensed institutions to comply with the requirements.
Draft ‘Prudential Regulations and Guidelines’ have been submitted for industry review and comments.
The Central Bank says that the dedicated Policy Unit also has allowed the Bank Supervision Department to focus on strengthening its operational support infrastructure. An important development in 2002 and 2003, for example, was the computerisation of prudential reporting mechanisms.
Overall, the Department remains focused on *”promoting and maintaining the safety, soundness and integrity of the Bahamian banking and financial system – and institutions operating within the system – by maintaining supervisory practices and standards conducive to the orderly operation and development of the industry.”*
The Central Bank acknowledges that the competitive dimensions of supplying international financial services have risen to the forefront in recent years, and says The Bahamas has responded by increasing the level of resources dedicated to the promotion of the sector, and through ongoing regulatory enhancements.
It foreshadows more convergence in the supervisory processes being applied to the various sub-sectors of the financial services industry, ‘capitalising on the cooperative structures that have been created among local supervisory agencies’.
In addition to gains in the quality of prudential oversight, the flow of data on the performance of the sector is expected to improve, providing more timely input to policy formulation. The CBB’s recently released annual survey report concludes, *”Having strengthened the regulatory framework of the jurisdiction, The Bahamas is better poised to take advantage of long-term growth opportunities in the supply of these services, with more assured confidence from its international supervisory peers and the clientele base. Such inroads should ensure a sustained and expanded contribution of financial services within the economy.”*