Since 1974, the Central Bank of the Bahamas has been responsible for monetary policy in the country. Their task is to protect and support the highest standards of integrity and leadership to promote monetary stability that is instrumental to economic development, domestic production, employment and growth. This includes the stability and soundness of the financial system. The respective duty of the Central Bank of the Bahamas is threefold:
- Promoting and maintaining monetary stability, credit availability, and balance of payments conditions that aid in the development of an orderly economy;
- Promoting and maintaining a high standard of conduct and management in the banking system; and
- To provide advice on matters of a financial or monetary nature to the Minister of Finance.
The Bahamas aims to be a prominent international financial center with a leading financial services industry. Efforts to substantiate this position reserve a role for the Central Bank to develop a dynamic monetary policy, modernized payment systems, sound management strategies and capacity building. The safety and soundness of the financial system is critical to achieve these objectives, where prudent foreign exchange management furthers internal stability.
The Role of the Central Bank in Times of Systemic or Institutional Distress
Early intervention to mitigate the risk of financial institutions in distress is needed. A set of tools and prudential measures are available to the Central Bank of the Bahamas through the Banks and Trust Companies Regulation Bill to accomplish this objective. A special resolution framework for banks in financial difficulties allows for the protection of the critical functions of the bank and risk management towards different stakeholders.
The Central Bank of the Bahamas can appoint a statutory administrator when the capital position of the bank falls below the minimum regulatory capital requirements, when the bank contravenes with the provisions of the Banks and Trust Companies Regulation Bill, when the bank (allegedly) engages in unsafe and unsound practice in such a manner as to weaken the condition of the bank and this threatens the interest of account holders or dissipate the assets of the bank.
Statutory administrators take over daily management of the bank and have full and exclusive powers to manage and operate the bank. Their first action is often to freeze all accounts and transactions of the customers of the bank to avoid a run on the assets of the bank and a destabilization of its value. There must be a solution for the bank within twenty four months. If the special resolution framework fails to provide a feasible solution for the distressed bank, the bank is liquidated. Deposit protection via the Bahamas deposit insurance fund provides eligible account holders with a repayment of their insured account balance.
Financial Regulation and Legal Framework
The Central Bank of the Bahamas oversees, regulates and supervises the domestic banking sector with both resident and non-resident financial institutions. Its mandate is provided in the Central Bank of the Bahamas Act. Licensing and operating requirements for financial institutions are laid down in the Banks and Trust Companies Regulations Act. For the scope of this website on deposit insurance and deposit guarantee claims, the following acts and regulations are important: the Financial Intelligence Unit Act, the Proceeds of Crime Act, the Financial and Corporate Service Providers Act, Financial Transactions Reporting Act and Regulations, and the International Business Companies Act. Although there is other legislation that governs the Central Bank, these are the most important rules that relate to supervised financial institutions in distress.
Central Bank of the Bahamas:
P.O. Box N-4868
Nassau, N.P, Bahamas
Phone:- +1 (242) 302 2600