|The Bahamas Investor Magazine
July 1, 2006
July 1, 2006
The Bahamas has always considered itself the better choice for international financial services. To a widely respected industry publication, however, The Bahamas may in fact be the best choice. The Banker, a well known Financial Times Group publication, recently named The Bahamas as the Best International Financial Centre in the western hemisphere as part of a high-level programme to identify the leading international financial centres (IFCs) across the world.
This recognition not only reflects The Bahamas’ long history of providing financial services, which dates back to the 1930s, but also reinforces the jurisdiction’s historic commitment to maintain and grow its presence as a provider of high-quality financial services. This achievement highlights the importance and foresight of the many progressive developments in the jurisdiction as it continues to meet the requirements of an increasingly sophisticated financial services marketplace.
The jurisdiction’s commitment to excel in financial services has been especially evident in the past several years, starting with the significant legislative changes that occurred in 2000, and that culminated over the past 18 months with additional legislative initiatives designed to provide products relevant to the international marketplace.
The relaunched Investment Funds Act in late 2003 set the stage for these initiatives. It was quickly complemented with the enactment of a Segregated Accounts Company Act, a Purpose Trust Act, a Foundations Act, enhancements to the International Business Companies Act and amendments to the Perpetuities Act.
Market responsiveness has become the hallmark of financial services in The Bahamas, and it is interesting to note that many of the approaches implemented in The Bahamas have been adopted by competing jurisdictions. The Bahamas’ model of an unrestricted fund administrator, introduced in 1995, has been reintroduced under different nomenclature in at least one jurisdiction in recent years. Features introduced in The Bahamas’ 1998 Trustee Act can now be found in the trust law of any number of international financial centres. And the recently introduced foundations legislation, a civil-law structure that The Bahamas developed over many years, is now under active consideration by other jurisdictions.
Strategic planning is also fundamental to the Bahamian industry. A five-year strategic plan for financial services was one of the first measures undertaken by the Ministry of Financial Services & Investments when it was established in 2002, and it continues to be the basis for many of the new legislative initiatives and other developments. The strategic plan, which is now being updated, includes 10 action points:
1. Creating a productive public- and private-sector partnership.
2. Replacing red tape with red carpet.
3. Identifying and creating opportunities for growth.
4. Safeguarding The Bahamas’ internal environment and expanding/upgrading infrastructure.
5. Developing expertise.
6. Promotion of the jurisdiction.
7. Building strong relationships with relevant international bodies.
8. Facilitating integration in the industry.
9. Developing linkages with tourism, investment, real estate and property development.
10. Facilitating Bahamian participation in the industry.
While progress has been made in each of these areas, the ongoing collaboration between the public and private sector to ensure a well-regulated, responsive and proactive jurisdiction can be credited with the success of the most recent legislative initiatives.
The challenge for 2006 and the years beyond is to maintain and, where practical, accelerate this momentum so that The Bahamas continues to grow and respond to ever-changing marketplace requirements and trends. The Bahamas Financial Services Board (BFSB), in its role as a catalyst for industry development and the international marketing of the jurisdiction, will continue to work closely with its member firms and the government to help ensure the country takes the necessary steps to enhance its leadership position and to identify and take advantage of global business opportunities.
Approximately 250 banks and trust companies are located in The Bahamas. Many of the world’s largest and most prestigious financial institutions have established branches or subsidiary operations, taking advantage of the country’s stable political and economic system, and ensuring the jurisdiction’s status as a regional leader in financial services.
The worldwide reach and influence of these institutions, combined with the entrepreneurial characteristic of the country’s well-regarded medium and smaller institutions and related financial services organizations, allow The Bahamas to look at business opportunities on a global basis.
The importance of keeping a global eye on business development opportunities is underscored in the 2005 World Wealth Report co-sponsored by Merrill Lynch and Cap Gemini, which noted that globally, the financial wealth of high-net-worth individuals is expected to reach US$42.2 trillion by 2009, growing at an annual rate of 6.5 per cent.
The task ahead is to determine the best opportunities for The Bahamas to capture its fair share of this burgeoning wealth in both its traditional markets of Europe and the Americas and others that offer realistic opportunities for future success.
Strong national assets
In this regard, the jurisdiction has committed to market research studies and analyses to determine the best opportunities for driving new business and gaining entry into new markets. All this is being undertaken in a bid to ensure The Bahamas brand for financial services continues to evolve and remain relevant and recognized globally.
With international financial services being a part of The Bahamas’ landscape for more than 60 years, the country does have considerable brand assets that have enabled it to achieve the status of a leading international financial centre.
The country’s political stability, stable economy and steady macroeconomic stance have led Standard & Poor’s to assign The Bahamas an A-1 long-term and A-2 short-term Sovereign Credit Rating. The Bahamas also enjoys an A-3 Investment Grade rating on its sovereign debt from Moody’s Investors Service.
The country remains committed to a tax-neutral platform in which there are no income, capital gains and inheritance taxes. There is also no stamp duty on security transactions. As there is no distinction between Bahamians and non-Bahamians, a person choosing to do business or to live in The Bahamas receives the same benefits as Bahamians.
In the global marketplace, The Bahamas is well positioned, with its location at the crossroads of the Americas, occupying the same time zone as New York, and with traditional ties to Europe, which facilitate investment into major centres.
Legislation that greatly streamlines the international purchase of real estate in The Bahamas has attracted an increasing number of second-home buyers from abroad. For example, the purchase of a home valued at more than $500,000 provides eligibility for permanent resident status. This is attractive to business executives who trade internationally through Bahamas-based operations and who wish to take advantage of the absence of income tax in The Bahamas.
While the jurisdiction’s tax-neutral environment is an important consider-ation, an equally important priority is maximizing the efficiency of financial assets. The country’s asset managers have the experience and global connections to provide the advice and planning to meet investment objectives. Access to best in class products through an open architecture also maximizes asset class, sector and geographic portfolio mix.
Furthermore, the integrity and continuity offered by institutions located in The Bahamas provide a secure environment. All banks and trust companies maintain a physical presence in the country and there are more than 60 institutions licensed to provide fund administration services and some 90 licensed to provide broker-dealer and/or investment advisory services.
The financial services industry in The Bahamas is staffed and managed by a large pool of experienced professionals. With personnel committed to the local community and continuity of service (which lies at the heart of a successful professional relationship) operations are more predictable and secure in The Bahamas.
Moreover, respect for personal privacy is a strongly held tenet within Bahamian society and the government has long recognized and valued the right of the individual to confidentiality in financial matters. This right is carefully balanced with the need to protect the integrity of the country’s financial systems. With its continued focus on the requirements of a discerning international clientele, a sound regulatory environment, market sensitive legislation and the presence of some of the most highly regarded financial institutions in the world, The Bahamas is not only a viable choice for these institutions and their clients, but continues to be a leader in the global financial services marketplace.
Wendy Warren is Chief Executive Officer and Executive Director of the BFSB, an organization devoted to increasing the quality and quantity of financial services in The Bahamas. She is a Chartered Accountant and holds a Bachelor’s degree in Accounting from Canada’s University of Waterloo.