The Central Bank of The Bahamas (CBB) says the financial services sector, accounts for approximately 10 to 15 percent of the country’s gross domestic product (GDP), making it the second-largest contributor to the economy.
“The sector employs a substantial number of highly skilled workers and has a direct effect on both employment and spending, while indirectly impacting other sectors, such as construction, real estate, and wholesale & retail trade.
“However, there is a contrast in product offerings, as the domestic sector is more retail and labor-intensive, while the international sector products focus on more high-net-worth clients and targets more specialist higher-priced labor,” the CBB said in its publication, “Gross Economic Contribution Survey of the Financial Sector in The Bahamas 2021”.
The CBB said data from The Bahamas’ financial services sector 2021 survey suggests that the sector continued to face headwinds, with global regulatory standards and efficiency pressures impacting balance sheet and operations consolidation.
“Specifically, the international sector continues to adjust to heightened standards for tax cooperation, anti-money laundering (AML), counter financing of terrorism (CFT), and anti-proliferation. Further, amid reducing levels of employment, the international sector has settled towards re-domiciling clients and operations to emerging lucrative opportunities outside of North America and Europe.”
The CBB said during 2021, the estimated balance sheet size of financial sector operations decreased, shown by a falloff in assets holdings within the banking sector. In particular, on the balance sheet assets contracted by approximately US$23 billion to US$149.8 billion, as the reduction in international banks’ assets, outweighed the gains in domestic banks’ assets.
Further, fiduciary assets fell by US$69.4 billion to US$153.8 billion with the CBB adding that assets under management also reduced, but marginally for the securities industry.
It said among credit unions, contributions were constrained, evidenced by declines in balance sheet assets. Meanwhile, onshore insurance operations featured stable balance sheet trends vis-à-vis 2020, following a significant expansion in 2019, which was due to undisbursed claims settlements related to the major hurricane.
The CBB said during the year, it continued to monitor supervised financial institutions’ (SFIs) approach to adapting their operations under the restrained conditions of the coronavirus (COVID-19) pandemic, and the identified risk management challenges of the environment.
“Further, the pandemic continued to pose heightened cybersecurity and fraud risk, for which awareness and education campaigns persisted, particularly to mitigate these risks for clients of domestic SFIs. In addition, supervision of credit unions remained focused on multiple risk-based outcomes around AML/Know Your Customer (KYC), corporate governance and credit risk management frameworks.”
The CBB said an analysis of the financial sector performance showed total taxes and fees collected by the government increased by 15.1 per cent to US$189.2 million last year.
It said underlying this development, transactional taxes on domestic intermediation activities rose by 19.2 per cent to $112.0 million, largely attributed to the growth in taxes on banking transactions (30.2 per cent) and insurance premium taxes (five per cent).
Further, license and registration fees rose by 9.6 per cent to US$77.2 million, underpinned by a 25.7 per cent rise in collections from investment funds (11.2 per cent of the total) and 10.6 per cent from international business companies.
In addition, receivables from banks and trust companies grew by 4.6 per cent, while collections from financial and corporate service providers surged to US$1.9 million from US$0.5 million in 2021.
The Central Bank of The Bahamas said the banking sector continued to dominate the financial landscape, notwithstanding operating within a COVID-19 pandemic environment.
It said on the domestic side, local banks maintained high liquidity levels, due primarily to subdued private sector credit demand and banks’ conservative lending posture.
“Meanwhile, for these SFIs, credit quality indicators weakened, owing to the conclusion of loan deferral schemes implemented to support persons and businesses impacted by the COVID-19 pandemic.”
The CBB said the total number of banks and trust companies licensed in The Bahamas decreased by three to 214 in 2021, following a reduction of four in 2020. Public banks and trust companies reduced by four to 80, while restricted, non-active and nominees increased by one to 134.
The CBB said public institutions providing an arrangement of domestic and international services included 48 Bahamian incorporated entities and 12 Euro-currency branches of foreign banks operating inside the country.
“Further, there were 20 authorized dealers and agents, which comprised 11 authorized agents and nine authorized dealers, inclusive of seven clearing banks.
“In 2021, total domestic assets within the banking sector grew by 1.1 percent to US$11 billion, trailing a gain of two percent in the preceding year, and an average annual increase of 2.2 percent over the past five years.
“Growth was underpinned by a rise in government bond holdings and surplus liquid balances with the Central Bank. Conversely, the total assets of the international banking sector reduced by 15.8 percent to US$129 billion. This extended the 8.7 percent falloff from the prior year and the average annual decline of 7.2 percent over the last five years,” the CBB noted.
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 says the financial services sector, accounts for approximately 10 to 15 percent of the country’s GDP){kind=link}