|The Bahamas Investor Magazine
February 16, 2019
February 16, 2019
Since it was launched, the Bahamas Financial Services Board (BFSB) has been a key player in the growth, evolution and sustainability of the financial services sector in The Bahamas. Last year, the membership organization celebrated its 20th anniversary, a landmark point from which to consider its progress and set strategic goals for its future.
A dynamic industry constantly having to adapt to international compliance initiatives, the financial services sector accounts for roughly 20 per cent of The Bahamas’ gross domestic product. More importantly, says current BFSB chief executive officer and executive director Tanya McCartney, it underpins the country’s middle class. “There is an agreed acceptance among stakeholders and the government of the importance of the financial services sector in The Bahamas,” she says. “It employs a very large number of Bahamian professionals, who are essential to the health of the overall economy.”
Heather Thompson, counsel at law firm Higgs & Johnson and long-time collaborator with the BFSB, underscores this sentiment, adding: “Tourism contributions are very easy to define, whereas the benefits from financial services are more nebulous. The sector brings many wealthy and highly skilled professionals to the country. They live here, they spend money here and they employ Bahamians. They are major contributors to the economic well- being of The Bahamas.”
Established in April 1998, the BFSB is an innovative, multidisciplinary body that embraces active contribution from individuals within government, banking, trust and investment advisory services, insurance and investment fund administration, as well as legal, accounting and management professionals. When it was created, the idea was that it would primarily be focused on promoting The Bahamas as an international financial centre (IFC), and it has remained true to that mandate. “We promote the financial services offering in all the key markets including LatAm, Europe, the US and Canada, and we have started to look at more uncharted areas in Asia and the Middle East,” says McCartney. “From a promotional aspect, all bases are covered.”
The BFSB’s costs, including those of the full-time executive director, are shared by government and the private sector through membership fees. This membership model is essential to the organization’s continued success, as members contribute not only financially, but also by giving their time to help deliver the promotional campaigns and events. “The support and help from our members is key to our efforts as they are able to come to events and give a ‘deep-dive’ as to what is happening in The Bahamas from a regulatory perspective, as well as on the specific products and services that we offer.”
Private-public sector collaborations
Over time the role of the BFSB has become more multifaceted, forming a bridge between the government and sector professionals, and influencing policy and legislation. “We have certainly evolved, especially over the last few years when the sector has come under extreme pressure from various international bodies, such as the European Union and the Organisation for Economic Co-operation and Development. We have seen increased collaboration between industry and government so that the policy response is responsible and balanced to aid the continued growth and development of financial services in The Bahamas,” says McCartney.
For its part, the current government under the leadership of Prime Minister Dr Hubert Minnis has renewed its commitment to the sector and lauds the advantages of having an institution such as the BFSB. “The key benefit of the BFSB is that it forms an intermediary between financial services providers and the government,” says Minister of Financial Services, Trade and Industry, and Immigration Brent Symonette, who often travels with the BFSB and participates in promotional events. “Sector professionals can talk to the BFSB and formulate their views and then liaise with the government. It’s an amazing vehicle–showing that the promotional side and the government policy side are able to work together.”
One person who understands this better than most is Ryan Pinder, having seen both the public and private sides of the sector as partner with Graham Thompson law firm and a former Minister of Financial Services. “The BFSB and its membership are very involved and committed to making sure legislative changes are correct. The government for its part is very open to input from the industry to address the reforms needed. It is another factor that sets The Bahamas aside from competing IFCs. The BFSB is a very cooperative institution rather than being an adversarial or isolated institution.”
Maintaining this has been a key priority for successive leaders of the BFSB. “The ongoing dialogue has trust at its core,” says McCartney. “The government and industry are committed to the same ideals of compliance and ensuring that the brand of The Bahamas is untarnished. We share a common goal to preserve the reputation of the jurisdiction and to develop products and services that suit the needs of our international clients.”
In this atmosphere of collaboration, over the years the BFSB has been instrumental in driving legislative reform. McCartney adds,“Through our various working groups and through legal committee, whenever legislation is promulgated, industry is at the table reviewing it, doing impact assessment and looking at what effect it will have on business and to what extent you can balance compliance with business.”
In recent months, the BFSB has worked closely with the Securities Commission of The Bahamas and the government on promoting the overhaul of the legislation governing The Bahamas’ investment funds industry, including an update of the Investment Funds Act. The BFSB is also continuing to work closely with the industry to ensure the infrastructure is in place to underpin products such as SMART funds and the ICON.
Potential for growth
Moving forward, the BFSB is looking to increase awareness in potential markets with its promotional Landfall events and seminars in untapped Asian markets such as Shanghai, Hong Kong and Beijing, and Dubai in the Middle East. Such promotional efforts can be enhanced by having member companies set up physical presences in these jurisdictions and spread the word about the benefits of The Bahamas, says Thompson. “I feel that we have some profile in the Asian market, because we have financial institutions that do a lot of business in those jurisdictions,” she says. “More of us need to have a presence in places such as Hong Kong and Singapore, because just by having a presence there you can build much better brand awareness of The Bahamas. Clients also want real-time responses, so we definitely need to be there.”
The other avenue for growth is to create new products. “We are looking at the development of products for new markets such as Mexico,” says McCartney. “We are also looking to develop a new ICON fund. Our Fintech Working Group is looking to leverage the opportunities in that space in a responsible and well-regulated manner. Wherever there is innovation in the marketplace, we want to make the most of those opportunities.”
Financial services such as those associated with captive insurance and arbitration are also potential areas for growth, suggests Thompson, although there has been little movement in developing these over recent years. “I would hope that we could do more with arbitration, we have been hearing about it for a long time,” she says. “We have the location but we need the physical infrastructure and the assurance that the expertise we need will be able to come to The Bahamas seamlessly. It’s all well and good putting the legislation in place, but that has to be supported by the expertise.”
For Pinder, there is real growth potential domiciling ultra-high-net- worth clients in The Bahamas. “With the advent of fiscal transparency, we are seeing a trend of HNW clients wanting to be where their money is. They may come from countries that are unstable or pose a financial, physical or political threat. These people are looking to move.
“We are in global marketplace and business is done all over the world. So we are seeing HNWIs setting up family office and governance structures from within The Bahamas and then using it as a base to manage their worldwide assets. This bodes well for the future and we can capitalize on that trend.”
For the BFSB and the financial services sector in general the last few years have been challenging, with increased scrutiny by international regulatory bodies and a push for tax compliance and exchange of information. However, Pinder for one is optimistic about the future: “I think we are in a good position moving forward. We have had to undertake certain reforms, but it is nothing that we are not used to dealing with. It is an industry that has a constantly shifting regulatory framework. I think we have come out ahead and the future is bright, and this is proof of the impact that the BFSB has on the development of the industry.”
To continue its work, the BFSB is looking to lobby government for more funding and could always “use more resources, human or financial,” says McCartney. “Our role has changed and we are in discussions to see how we might qualify the position of BFSB as we celebrate 20 years and look to the future.”
Minister Symonette says he is hopeful that “over the coming fiscal year we will be able to address the funding issue and also deal with it in a more creative way.” He says: “We are also looking to develop a foreign direct investment promotional arm of the Bahamas Investment Authority, which will impact on the role of the BFSB.”
The continued success of the BFSB for the next two decades and beyond is critical, says Thompson. “We have very strong leaders at the BFSB who care about the development of the country. I feel they have been essential for financial services in The Bahamas and will continue to be so.”