**Interview with Mrs. Wendy Craigg, Governor of the Central Bank of the Bahamas**

**BFSB:** How important is the financial services sector?

***WC:** There is no doubt about the importance – and success – of the financial services sector for The Bahamas. Banking and Trust activities account for the largest share of the sector, with some 248 institutions having a relatively stable asset base of approximately $340 billion and with the banks alone contributing some $444 million to the GDP of the nation. There are some 99 insurance companies; 725 collective and investment schemes with assets under management approaching $210 billion; and 441 financial and corporate service providers. These statistics speak to The Bahamas’ success as one of the most important financial services jurisdictions in the world, and clearly illustrate how these activities have become integral to our overall strategy to promote economic growth and development. They reinforce the very reason why we should have a keen interest and, I dare say, responsibility to stimulate and sustain growth in financial services.*

**BFSB:** What do you see as critical for the success of the sector?

***WC:** The success of the industry, and in turn, its continued contribution to the Bahamian economy will depend on the measures we take to make the sector stronger and more dynamic—generally, what we do to inspire confidence, and support competition and innovation.

I believe there are four key points on which we will need to focus our resources, if we are to stimulate and sustain The Bahamas’ reputation as a premier centre for global financial services.

* **Regulatory Framework:** The quality of the regulatory and supervisory framework is an essential centerpiece to inspiring confidence in ones’ regime. I believe that the legislative environment will continue to play an important role in sustaining and safeguarding the progress achieved over the years, and in building the competitiveness of the financial services sector.

* **Innovation:** In our jobs as regulators, it is important that we strike the right balance between the need for a cost effective and responsive regulatory regime and one which at the same time allows the sector the flexibility to innovate and adapt as new markets emerge and existing markets change.

* **Workforce – Our Knowledge Infrastructure:** People are the industry’s most important resource. By and large, accelerated technology, organizational changes and competition have elevated the premium on skills for all workers. Our ability to take advantage of the new opportunities as they present themselves will require us to develop a steady pool of prospective workers for the financial services sector. This in itself is a multifaceted task, focusing, on the one hand, on enhancing the skill levels of new entrants to the sector, and then providing ongoing training opportunities for persons working in the industry.

* **Public/Private Partnership:** A significant key to the future success of the services sector will continue to be a close public private partnership—all industry stakeholders working hand in hand in developing strategies to confront the challenges that lie ahead of us. The strategy must take into consideration the industry’s long-term potential and development needs and the formulation of an action plan to help achieve the desired objectives and there has to be a shared understanding and ownership of these goals.

Sustaining growth in the financial services sector complements the overarching framework for economic growth and development in The Bahamas, and is consistent with the shared vision of The Bahamas as a modern, highly-skilled and competitive jurisdiction for business.*

**BFSB:** What is the key role of the Central Bank of the Bahamas, as primary regulator within the financial services sector?

***WC:** I would say that would have to be ensuring financial system stability. Since the early 1990s, safeguarding financial stability has become an increasingly dominant objective of regulators, and Central Bankers in particular recognize the importance of a strong, stable financial system to promoting sustainable economic growth and improved standards of living. The Central Bank’s work in this area has a lot to do with managing risk, and essentially devising safeguards to limit vulnerabilities in our financial systems. This clearly is the broad objective of the new capital accord, Basle II.*

**BFSB:** Basel II has been described by some as being too complex and challenging and, even, not entirely relevant.

***WC:** Basel II has a number of features that will promote the safety and soundness of the financial sector through improvements in corporate governance, transparency and risk management. It will also demand greater cross-border cooperation between supervisors, and therefore promote greater consistency in the implementation of standards. The implementation of Basel II is certainly not without its challenges for supervisors. In a significant way, our ability to successfully shift to a risk-based supervisory regime will depend to a large extent on several other factors, not the least of which are the quality and reliability of our data and reporting systems — and the adequacy of our human resources.*

**BFSB:** Is there one theme, which perhaps has had the most significant impact on the architecture of financial services supervision and regulation in recent years?

***WC:** That has been anti-money laundering and terrorist financing. For us, regulation is largely determined at the international level, and so we had to conform to international standards and cooperate with international bodies in the fight against money laundering and the financing of terrorism. However, as we all know, money laundering is not a static business, and so we will need to continue to update our defences. The benefit of such vigiliance is to underpin the security and reputation of our regime—which are all ingredients that are vital to inspiring investor confidence.*