|The Bahamas Investor Magazine
June 27, 2007
June 27, 2007
The Bahamas’ financial services industry boasts a long history of excellence in product and service provision. Private banking and asset management have been core components of the Bahamian economy since the country gained its independence from the United Kingdom in 1973, enabling The Bahamas to forge its own skilled, home-grown workforce over many generations. The Bahamas boasts one of the oldest democracies in the hemisphere, dating back to 1729. Its socio-economic stability, modern legal system and progressive regulatory environment governing the investment sector, coupled with its intellectual resources, have been significant attributes in the development of its financial services sector. Today, approximately 250 banks and trust companies are located in The Bahamas, with many of the world’s most prestigious financial institutions having established branches or subsidiary offices here.
Supporting the industry is a stable of organizations devoted to generating awareness of The Bahamas as a leading international financial centre (IFC) and providing a high level of service to international investors. Foremost among these is the Bahamas Financial Services Board (BFSB), which was launched in 1998 by the financial services industry in partnership with the government of The Bahamas with the goal of generating a greater awareness of The Bahamas’ strengths as an IFC. Wendy Warren, in her capacity as BFSB’s CEO and executive director, and Leslie Isaacs, director of financial services at the former Ministry of Financial Services and Investments, serve as permanent representatives on the BFSB Board of Directors. This board is a multidisciplinary body made up of individuals from government, banking, trust and investment advisory services, insurance and mutual fund administration providers as well as legal, accounting and management professionals.
The BFSB is responsible for representing and promoting the development of all sectors of the domestic financial services industry, including banking, private banking and trust services, mutual funds, capital markets and investment advisory services.
Numerous other organizations also exist in The Bahamas to facilitate transactions, promote the industry and drive advancements in product development and legislation. These include the Society of Trust and Estate Practitioners (STEP), the Association of International Banks and Trusts (AIBT) and the Financial Services Consultative Forum (FSCF).
Products and markets, past and future
Today, The Bahamas continues to meet the requirements of an increasingly sophisticated financial services marketplace, with an ever-broadening slate of products to meet the needs of international investors. The relaunched Investment Funds Act of 2003 set the stage for the introduction of a wealth of new product options including the Segregated Accounts Company Act, the Purpose Trust Act, the Foundations Act, enhancements to the International Business Companies Act and amendments to the Perpetuities Act. In late 2006, The Bahamas introduced private trust legislation. Other recent advances include proposed amendments to foundations legislation and amendments to the Securities Industry Act, which will bring The Bahamas in line with principles set out by the International Organization of Securities Commissions, the international securities regulator.
At the same time as it strengthens and supplements its product line-up at home, The Bahamas’ financial services sector is also setting its sights on new markets to achieve growth, including China, India, Eastern Europe and Central and South America, with the BFSB having taken or planned exploratory trips to several of these locales.
Top international financial centre
The financial services industry’s prowess was recognized on an international scale several times during 2006; in early January, it was revealed that The Banker, a well-respected Financial Times Group publication, had selected The Bahamas as the best international financial centre in the western hemisphere as part of its programme to identify IFCs around the globe “that offer banks and financial institutions the best locations and infrastructure to carry out their business and serve their clients.”
Later that same year, The Bahamas’ top-notch financial services intermediaries received international recognition when International Financial Law Review 1000, a major industry publication that reviews and rates the world’s top attorneys, ranked four Bahamian law firms as Tier 1—the highest possible rating. The firms —Higgs & Johnson; Lennox Paton; McKinney, Bancroft & Hughes and Graham, Thompson & Co—were praised by The Legal Media Group publication for their outstanding work with various clients in the financial services field. Higgs & Johnson, for instance, was observed to be a key beneficiary of the high level of foreign direct investment in domestic investment projects through its role as an advisor to the Royal Bank of Canada, JP Morgan Chase and Royal Bank of Scotland. Graham Thompson & Co was cited as a key advisor to a number of major domestic commercial banks such as Commonwealth Bank, Scotiabank and Bank of The Bahamas International, on regulatory issues, transactions and project finance. Lennox Paton, meanwhile, was recognized for its involvement in a number of high-level transactions such as the $5-billion Ginn Clubs & Resorts project in Grand Bahama, the $54-million purchase of Winn-Dixie’s majority 78 per cent stake in Bahamas Supermarkets and its representation of Starwood Hotels in the Baha Mar development on Cable Beach.
Other sources of capital
In addition to the financial services industry, a number of other industries and sectors contribute significantly to the Bahamian economy. The most notable of these is tourism, which accounts for just over half of the country’s gross domestic product. Currently, a sizeable portion of incoming investment capital can be attributed to the government’s “anchor project” policy, wherein it has encouraged the construction of a development project on each major Family Island. According to former Prime Minister Perry Christie, more than 430 proposed investment projects have been submitted to The Bahamas from 2003-06, with more than 50 of these projects worth $13.6 billion currently under way, in varying stages of construction. The figure is a notable one, in that the volume of investment surpasses by a significant amount The Bahamas’ gross domestic product in 2005, which stood at $5.9 billion.
Movie-making and commercial filming have also emerged as a supplemental source of capital to the Bahamian economy, thanks to the on-site filming of a number of blockbuster films in recent years, including After the Sunset, the Pirates of the Caribbean films and the James Bond movie Casino Royale. The film industry has injected an estimated $70 million into the Bahamian economy over the past five years, with the filming of Pirates of the Caribbean II and III alone bringing in $38 million of that amount.
The strengthening and expansion of the domestic film-making industry is beneficial to the Bahamian economy on a number of levels. In addition to affording The Bahamas a wealth of international exposure, the film industry is also providing some long sought after economic diversification, which may help shift reliance away from the islands’ tourism sector as the primary engine of revenue generation. And the economic shift should be a sustained one, as The Bahamas is now developing its own domestic film-making industry. Having apprenticed on shoots with foreign film-makers, many Bahamians are now using the experience they’ve gained as a springboard to develop their own movies. The development of these new growth areas, coupled with traditionally robust economic sectors, is helping to ensure strong performance from the Bahamian economy going forward and a higher standard of living for the Bahamian people.
Bahamas Financial Services Board
Led by the private sector, but consulting closely with government, the Bahamas Financial Services Board (BFSB) is an innovative, multidisciplinary body committed to promoting The Bahamas as an international financial centre. The board also develops initiatives to meet the rapidly changing demands of modern international financial markets.
Board members, who include individuals from every sector of the financial services industry, as well as from within government, are elected to two-year terms by voting member representatives. Both Wendy Warren, as the BFSB’s CEO and executive director, and Leslie Isaacs, who was director of financial services at the former Ministry of Financial Services and Investments, serve as permanent board members.
Industry association representatives also serving on the board are: Jan Mezulanik, Association of International Banks & Trust Companies (AIBT); Cherise Cox-Nottage, Bahamas Association of Compliance Officers (BACO); Ivylyn Cassar, Bahamas Association of Securities Dealers (BASD); Wayne Munroe, Bahamas Bar Association (BBA); Peter Muscroft, Bahamas General Insurance Association (BGIA); Kendrick Christie, Bahamas Institute of Chartered Accountants (BICA); Suzanne Black, Bahamas Real Estate Association (BREA); David Slatter, CFA Society of The Bahamas (CFASB) and Paul Winder, Society of Trust and Estate Practitioners (STEP).