The Tribune

By NEIL HARTNELL Tribune Business Editor WITH 40 per cent of Swiss private banks eyeing foreign acquisition targets, a leading accountant yesterday predicted further consolidation in the Bahamian financial services industry, telling Tribune Business that "out of the box thinking" was essential to this nation's competitiveness. Simon Townend, the Bahamas-based head of KPMG Corporate Finance for the Caribbean, said a study on the Swiss private banking industry, conducted by the international accounting firm, showed the need for "creativity" in positioning this nation as the most attractive financial services hub in the region. Estimating that Swiss-owned institutions accounted for 40-50 per cent of the Bahamian financial services sector "in terms of assets and resources", Mr Townend said the KPMG survey also "validates" the Bahamas Financial Services Board's (BFSB) and industry focus on Latin America as a major growth market. The report found that Latin America ranked alongside Western Europe and Switzerland among the "top three priority growth markets" for Swiss private banks, some 83 per cent of institutions surveyed already providing services to the region. Suggesting that the Bahamas could exploit its current strategy to position itself as a private banking "springboard" to Latin America, Mr Townend said it was vital that this nation build on its "bread and butter strengths" in private wealth management while targeting niche opportunities in other markets. And he also joined those urging that Immigration policy be relaxed to permit specialist foreign attorneys to practice in the Bahamas, along with calls for greater ties between financial services and sectors such as maritime, real estate and aviation. Examining the KPMG survey's implications for the Bahamas, given that the subsidiaries of Swiss banks accounted for such a significant chunk of the so-called offshore sector, Mr Townend said increased compliance costs and regulator pressures were continuing to impact small and medium-sized providers. It was, he added, "creating and serving as a catalyst for more consolidation and mergers and acquisitions in Switzerland, but I also would expect to see more consolidation here and elsewhere. There's banks from a lot of different places, but in terms of scale the Swiss banks are very important". The survey found that 55 per cent of private banks expected "greater consolidation in the international market" within the next two years, with some 40 per cent already having eyed "targets abroad". And some 21 per cent of Swiss private banks - more than one in five - said they anticipated "making a foreign disposal over the next 18 months". Some 30 per cent of those surveyed said they had received a "serious approach" from a prospective purchaser within the past two years. Given these trends, Mr Townend said the Bahamas needed to ensure it was the leading Caribbean location for private banks, compared to Bermuda and the Cayman Islands, and position itself "as the springboard for their Latin American strategy". "Let's hope the Bahamas is where they continue to want to be," he added. "That's where we have to continue to be creative, and work with the banks to make sure this is the jurisdiction of choice for private wealth management-type products." Mr Townend said he had been encouraged by attendees at a recent financial services industry seminar. "I was actually quite amazed at how many people were there, and people are looking at creative, out of the box products that set the Bahamas aside from others in the private wealth management sector," he added. "We've just got to continue on that road." The KPMG report "certainly validates the Latin American strategy" being pursued by the BFSB, Mr Townend said, noting that many Bahamas-based private bankers were also "putting a lot of focus" on the region themselves. While Asia and eastern Europe were among the fastest-growing private wealth management markets, the KPMG Corporate Finance chief said these were "harder" for the Bahamas to penetrate, given the geographical and time-zone differences. Many Swiss private banks were already setting up subsidiaries in Hong Kong and Singapore, which further backed the focus on Latin America and "making sure we do everything we can to secure this market for the Bahamas". Looking at where the Bahamas needed to improve to secure the future of its financial services industry, Mr Townend told Tribune Business: "We're very strong, as far as I can see, when it comes to private wealth, trust, that type of area, and need to do everything we can to strengthen further. "This will involve linking in more with London lawyers, New York lawyers, Toronto lawyers, where they deal with the private client business. That type of skill set coming out of those jurisdictions will not compete with lawyers in the Bahamas, and we have to look at strengthening those types of ties, even to the extent of relaxing Immigration laws to help those lawyers structure products here. "That's [private wealth management] what we're good at, we have critical mass in that area, and need to grow it." Acknowledging that the next component had already been pursued, Mr Townend said the Bahamas needed to strengthen the ties between its financial services, real estate and maritime industries, especially since many second home owners were becoming clients of this nation's banks. The Bahamas Maritime Authority (BMA) had already moved on this via the creation of a yacht registry, and the idea of a Bahamian aviation registry had also been revived. "The more we can integrate these types of business with the private wealth sector, the better," Mr Townend added. "We've also been modernising our laws, the insurance legislation, the securities legislation, and must continue to find niches in insurance and the funds sector where it makes more sense to come to the Bahamas rather than go to Bermuda for insurance, or Cayman for funds. "It's very difficult to compete with them in what they do, but there are niche areas. We have to continue to think out of the box, but not lose focus on our real bread and butter and strengths."