business@tribunemedia.net
WEDNESDAY, FEBRUARY 5, 2020
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JOHN DELANEY
‘Don’t cry over spilt milk’: Exit of Julius Baer By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas must “not cry over spilt milk” due to Julius Baer’s imminent exit, a former attorney general warned yesterday, and should instead focus on remaining “relevant” as a financial centre. John Delaney, principal of the Delaney Partners law firm, told Tribune Business the jurisdiction needed to make itself “the most desirable place from which to conduct financial services” after Julius Baer announced the closure of its Bahamian business with the loss of 30 jobs. While the Swiss-headquartered institution’s decision to depart was “not welcome”, Mr Delaney said it was presently unclear whether there was a wider message or “implications” for The Bahamas as an international financial centre (IFC) in its decision. Rather than dwell on the past, he called on The Bahamas to instead look to the future and ensure its financial services legislative and regulatory framework were aligned with international best practices and standards. Mr Delaney added that besides continuing to develop its product menu, The Bahamas also needed to embrace Fintech (financial technology), digital assets and blockchain technology to attract “the most modern type of financial services”. Warning that the jurisdiction had to prioritise remaining “relevant” in a rapidly-evolving global financial services industry, he added that it needed to keep attracting high net worth individuals and companies to domicile in The Bahamas in compliance with recently-passed economic substance legislation and also ensure the judicial system provides swift commercial dispute resolution. “Rather than cry over spilt milk and what has been lost, we need to be focused on remaining relevant going forward,” Mr Delaney told Tribune Business. “What are we doing to ensure we remain a desirable place from which to do financial services? “We know there are things we should be looking at, and trying to look at, to ensure we be the most desirable place for financial services. We need to focus on doing those things. We’re constantly looking at legislative reform and it needs to happen. “We have looked, and still continue to look at, things that make it convenient for high net worth individuals and companies to redomicile in The Bahamas consistent with economic presence. We need to look at the resolution of commercial disputes so that can happen efficiently and in good time. All these things are ingredients that are fairly well-known. They are things we need to continue to focus on and address.” Julius Baer said the decision to close its Nassau “booking centre” was part of a strategy designed to slash its global cost base
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‘All property owners must insure by law’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
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AHAMAS First’s chief executive yesterday said laws making it mandatory for all business and residential property owners to have full catastrophic insurance cover “must be on the table for discussion”. Patrick Ward told Tribune Business he would personally seek to ensure it was on the industry’s agenda after the International Monetary Fund (IMF) called for The Bahamas to develop “new approaches” to increasing insurance penetration and prevent the “dire straits” suffered by any homeowners post-Hurricane Dorian. The fund, in a statement on its team’s visit to The Bahamas last week, said yesterday: “The financial sector appears to have weathered the hurricane well, with limited exposures to uninsured assets. Adequate reinsurance of domestic insurance companies abroad cushioned the impact of the hurricane on the domestic insurance sector.
the insurance sector once finalised.” He provided no details. However, Mr Ward yesterday argued that The Bahamas needed to explore making it a legal requirement for all property owners - business or residential - to have full catastrophe coverage in much the same way that the Road Traffic Act stipulates that all motorists have adequate insurance for their vehicles. Emphasising that he was voicing a personal view yet to be discussed with the wider Bahamian insurance industry, the Bahamas First chief said Dorian had exposed that just 40-50 percent of properties in the two devastated islands had proper insurance. This, he added, meant that Bahamian taxpayers were being burdened with greater recovery costs especially related to private home and business repairs - than they would otherwise have been had the owners
THE Bahamas will not be taking up the International Monetary Fund’s (IMF) offer of up to $200m in concessionary funding for Hurricane Dorian recovery, the deputy prime minister confirmed last night. K Peter Turnquest told Tribune Business via a messaged reply to its questions that the fund’s proposal was “not part of the financing mix” the Minnis administration is using to cover its net $508m fiscal deficit blow-out and essential reconstruction costs. “Yes, the IMF has offered unconditional rapid financing at concessional rates,” he said. “This financing offer is not part of the financing mix currently contemplated.” Marlon Johnson, the Ministry of Finance’s acting financial secretary, similarly affirmed: “We don’t intend
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• Concessionary funding ‘not part of financing mix’ • Fund: Speedy permits, labour key to recovery pace • Calls for structural reforms to be ‘accelerated’
K PETER TURNQUEST that as part of our financing mix. We have sufficient interest from our partners who do financing, so that is not required for this particular operation.” He explained that the $200m facility offered was part of the typical financing instruments that the IMF makes available to countries that have suffered natural
disasters, as The Bahamas did with Dorian, to assist their reconstruction efforts and economic recovery. Explaining that it was different from the assistance provided to states undergoing structural reforms, or encountering balance of payments difficulties, Mr Johnson added: “They do have these facilities available for countries going through what we did with Dorian in terms of providing short-term financing. Both men spoke after the IMF, in a statement on its week-long visit to The Bahamas that ended on January 31, dangled the carrot of up to $200m in financial assistance from its so-called Rapid Financing Instrument. “The IMF stands ready
to support The Bahamas, including through its emergency financing facilities,” its Bahamas team leader, Fabian Bornhorst, said. “Through the IMF’s Rapid Financing Instrument up to US$ 200m could be available to The Bahamas at low cost and without policy conditionality.” While that has been politely rejected, Mr Turnquest told Tribune Business that the government and IMF were “completely aligned” in other areas including the latter’s call for a “timely return” to fiscal consolidation efforts once post-Dorian reconstruction was behind it. The IMF’s statement, indicating that its visit was
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Economy fears: Bahamas ranked world’s sixth most expensive state By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas’ ranking as the world’s sixth most expensive nation to live in highlights “a fundamental challenge related to the country’s economic viability”, it was argued last night. Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, said the findings by CEOWORLD magazine exposed the “tremendous” burden imposed on lower income Bahamians by the ever-increasing cost of living and growing “wealth disparity” between rich and poor. He told Tribune Business that many households and small businesses were “struggling to manage” in this
• Survey exposes ‘tremendous challenge’ • Many ‘struggling to manage’ living costs • Warning that house buyer pool ‘shrinking’
MATT AUBRY environment, and having to be “super stringent with their money” to make ends meet, thereby acting as a further drag on economic growth.
The ORG executive spoke out after the magazine’s survey ranked The Bahamas behind just Switzerland, the world leader, and Norway, Iceland, Japan and Denmark, making it the world’s sixth most expensive country to live in and the highest-cost destination in the Western Hemisphere. The survey, which uses New York as the baseline benchmark to compare all countries to, based its assessment on five metrics including the cost of living; rent; groceries; eating out; and purchasing power.
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
To assess these metrics, the magazine looked at consumer prices indexes and cost of living studies from 132 nations, as well as publicly-available data that measured every-day costs such as accommodation; clothing; taxi fares; utility; internet; the price of groceries; transport; and eating out. The Bahamas scored a combined 82.51 points in its “cost of living” rankings, rating especially highly on restaurant costs at 83.66 - a result that may have been
“done the responsible thing” and properly insured. Suggesting that a repeat of this situation would be unsustainable for an already cash-strapped government, Mr Ward said the level of non-insurance and under-insurance uncovered post-Dorian would likely have been even higher but for the presence of Abaco’s large second homeowner community. Noting that these investors were more inclined to insure, he added that legally mandating - and enforcing - the requirement for all property owners to purchase insurance could help reduce premium rates as more properties would “participate in the risk pool”. “That’s one of the ideas that has to be on the table for discussion,” Mr Ward told Tribune Business of such a proposal. “I’m not being dogmatic in saying it
Bahamas rejects IMF’s $200m Dorian offering By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
Loan arrears fall $125m in 2019 to decade-low TOTAL loan arrears fell by $123.5m or 15 percent during 2019 to hit their lowest level for a decade at year-end, a Central Bank of The Bahamas presentation has revealed. The monetary policy regulator, unveiling the status of credit quality within the Bahamian commercial banking system, said the ratio of arrears - loans that are 30 days or more past due - had declined by 2.2 percentage points during 2019 notwithstanding Hurricane Dorian’s impact. And non-performing loans, which are 90 days or more past due, represented just over half the decline with a $63m or 12.2 percentage point decrease over the 12-month period. The ratio of non-performing loans to total outstanding credit also dropped by 1.1 percentage point to hit eight percent at 2019 year-end. “During 2019, total private sector arrears contracted by $123.5m (15.3 percent),” the Central Bank said. “The ratio of arrears to total private sector loans fell by 2.2 percentage points to 12.1 percent in response to enhanced debt collection efforts and the improvement in the economy. “Short-term arrears fell by $60.5m (20.7 percent) resulting in a 1.1 percentage point decline in the arrears rate to 4.1 percent. Non-performing loans fell by $63m (12.2 percent), and the non-performing loan rate by 1.1 percentage points to 8 percent.” All three loan categories saw a double-digit decline in bad loans. Mortgage arrears fell by 15.3 percent year-over-year, while those for consumer and commercial loans were down by 13.5 percent and 20.3 percent, respectively. John Rolle, the Central Bank’s governor, this week indicated it had revised projections that the Bahamian commercial banking industry’s non-performing loan ratio will rise by several percentage points to hit the ten to 12 percent range in Dorian’s aftermath. He said the sector’s low exposure to the two Dorian hit islands, which collectively account for around 10 percent of its outstanding loan portfolio, meant the Central Bank no long saw “as major a push back as we anticipated initially” in terms of an increase in bad credit. Mr Rolle added that the Central Bank had also seen “millions of dollars paid down on loan balances in those islands” as a result of hurricane insurance settlements, and the reduction in outstanding debt by “sizeable chunks” could ensure the loan arrears ratios keep going downwards. Elsewhere, the Central Bank reported that excess liquidity in the commercial banking system expanded by $433.4m during 2019 to hit $2bn by year-end, reversing the previous year’s $209.3m decline. Excess reserves in the system jumped by a similar $434.9m to reach $1.1bn, again reversing the prior year’s $186.2m contraction. “At end-December 2019, bank liquidity increased, as the growth in deposits outpaced the rise in domestic credit. Inflows were provided from tourism and re-insurance proceeds,” the Central Bank said.
• Bahamas First chief to put idea on agenda • Says ‘must be on the table for discussion’ • IMF urges ‘new approach’; many in ‘dire straits’ “However, insurance penetration, in particular in the residential segment, remains low, leaving many homeowners in dire straits. New approaches to extend insurance coverage as part of a broader disaster risk management strategy would increase resilience.” K Peter Turnquest, deputy prime minister, last night told Tribune Business via messaged replies that the Ministry of Finance has “some initiatives” for increasing catastrophic coverage among Bahamian homeowners and businesses that it will soon discuss with the insurance industry. “The government recognises the national exposure to climate risk posed by significant exposed and under-insured private sector risk,” Mr Turnquest said. “The Ministry of Finance is investigating options to incentivise more insurance uptake in the private sector, and has some initiatives that it will discuss with
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