The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Three “very small and weak” credit unions, facing a combined $500,000 to $1 million shortfall, will be sold or liquidated prior to the Central Bank of the Bahamas taking over supervision of the sector.

The International Monetary Fund (IMF), in its recently-released assessment of the Bahamian financial services sector’s stability, disclosed that this nation’s credit union sector had $272 million in assets and 27,700 members by end-2011.

That makes the industry a small yet significant player on the financial services landscape, hence the moves to increase oversight by transferring regulatory responsibility from the Department of Cooperative Development within the Ministry of Agriculture and Marine Resources.

The IMF report confirmed that regulatory responsibility “will be moved to the Central Bank after the merger, sale or liquidation of three very small and weaker credit unions with a combined shortfall estimated at about $0.5–$1 million”.

Elsewhere, the Securities Commission said concerns about weaknesses in the Investment Funds Act were “already on the radar” prior to the IMF’s visit. For in its report, the Fund warned: “Regulation of the investment funds industry has not kept pace with regulatory developments globally. The coverage of some categories of locally domiciled professionals in the investment funds industry (such as fund managers and custodians) is insufficient.

“The current governing legislation is a disclosure-based regime and does not provide sufficiently for the Securities Commission to set mandatory asset management standards.

“Also, the Securities Commission could take a more proactive stance in its due diligence and by expanding the scope of its inspections beyond the current focus on fund administrators to cover those fund managers, operators and custodians with a physical presence in the jurisdiction.”

Expanding further on this theme, the IMF said the Investment Funds Act was “no longer sufficient to match good practice as set out” by IOSCO, the global securities regulatory body. In response, the Securities Commission said it had created a team – featuring public and private sector representatives – to review the Act.

The IMF report said Securities Industry Act licensees grew 13.8 per cent year-on-year to 132 in 2011, while 713 investment funds – containing $86.61 billion in assets under management – were registered with the Securities Commission.

“There are 713 registered or licensed funds, although this has declined from 803 in 2008 due to challenging market conditions and consolidation of some fund operations into foreign jurisdictions,” the IMF report said.

“The funds held $86.6 billion of assets under management at end-2011, down sharply from $298 billion in 2007.”

There were only three fund managers – managing a total of 12 investment funds – based in the Bahamas. This compared to 65 fund administrators.