The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas International yesterday confirmed it had effectively closed its sole US branch on June 30, after regulatory changes made its business model “non-viable”.

Paul McWeeney, the BISX-listed institution’s managing director, told Tribune Business that amendments to US and Florida banking laws meant the Miami branch was no longer able to outsource all its back office functions to Nassau.

He added that the requirement for a full back office presence, and increased staff complement, in Florida meant the branch’s continued existence was simply not economically viable.

“We did suspend the operations on June 30,” Mr McWeeney told Tribune Business. “Technically, it probably will be a closure.

“We could no longer continue any of our support out of the Bahamas, meaning we had to hire three to five more members for that operation, and given the economic climate that was something the bank could not do at this time.”

Bank of the Bahamas International thus determined that the costs and “substantial investment” required to transform the Miami service centre into a full-scale, standalone branch would exceed the likely returns.

Mr McWeeney explained that the Miami branch closure was timed to coincide with Bank of the Bahamas International’s 2013 fiscal year end.

He added that the decision was taken by the Board of Directors to “cease the operations and determine the next step”.

Following its March 2008 opening, Bank of the Bahamas International’s Miami branch - trading as BOB Financial Services - outsourced, or ‘offshored’, all compliance, risk management, finance, information technology and all back office support systems to headquarters in Nassau.

But, with changes to Floridian and US banking laws following the post-2008 global financial crisis, Mr McWeeney said Bank of the Bahamas International had been “advised this was no longer acceptable”.

The necessary support systems and staff needed to be present on-site at the Miami branch “at all times”, and he added: “That could not be justified on a cost/benefit analysis. Based on that new model, it would not be viable. And we didn’t want to run the risk of contravening US regulations.”

Only two staff are impacted by the Miami branch’s closure. While Bank of the Bahamas International had offered them alternative posts in the Bahamas, the duo preferred to remain in the US.

Mr McWeeney told Tribune Business that the financial crisis and subsequent recession had also undermined the initial rationale for opening the Coral Gables-based branch - namely to get Bank of the Bahamas International more involved in trade and commercial financing.

“Because of the economic downturn we were never able to fulfill the initial business model; to get more involved in trade finance,” he said.

“We still had to rely on the customer base in Nassau to propel that, as commercial business was not expanding.”

Mr McWeeney, though, indicated that the five-year Miami stay had not been entirely in vain, as Bank of the Bahamas International had gained more than 1,000 new retail accounts through its US presence.

“We did get a lot of new accounts from it - over 1,000 persons - and are trying to find ways to maintain that,” he told Tribune Business.

“Customers used it, mainly Family Island customers who did not want to come to Nassau before going to Florida, and a lot of them have expressed disappointment.

“There were quite a few customers who used that operation, and we’re trying to give them options through our correspondent banks.”

Mr McWeeney said Bank of the Bahamas International had explored relocating the Miami branch to other “territories” in Florida, but abandoned the idea after realising that the same laws and regulations were set to be applied state-wide.

He explained that the Miami branch never had its own ‘book of business’, but effectively acted as an “online extension” of all the Bahamas-based branches and business units.

Summing up the end to Bank of the Bahamas International’s Florida venture, at least for the moment, Mr McWeeney told Tribune Business: “It’s unfortunate. We still think it has a place in the future.”

The bank, he added, has no immediate plans for international growth elsewhere, and is focusing on domestic operations and expansion possibilities closer to home in the Family Islands.

“We plan to expand more in the domestic archipelago, and right now the US is so difficult to operate in,” Mr McWeeney said.

“We’re working with the majority shareholder [the Government] on some stuff internally, but I can’t disclose that at this time.”