The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank has moved to review the “legislative framework” for the Deposit Insurance Corporation, which saw its assets increase by $4.5 million to end 2013 at $32.1 million.

The Corporation insures Bahamian bank deposits up to a $50,000 limit in the event an institution collapses, and the monetary system regulator engaged help from their Canadian counterparts last year in a bid strengthen it.

The Corporation, which insures deposits at 12 member institutions, was formed in the wake of Gulf Union Bank (Bahamas) collapse in 1998. The Central Bank, in its annual report, said it had worked with the Canadians to “assess the target size of the fund for member banks, and to examine the requirements for establishing a separate deposit insurance fund and premium rate for credit unions.

“Work also commenced on a review of the legislative framework for the Deposit Insurance Corporation,” the Central Bank said, “within the broader national crisis management exercise aimed at ensuring the adequacy of the financial safety net arrangements.”

Financial institutions covered by the Corporation pay annual premiums, equal to 1/20 of 1 per cent of their deposit bases, to fund it.

“Based on average total insurable Bahamian dollar deposits in banks, of $5.57 billion during 2012, relative to $5.52 billion in 2011, premiums levied and collected in 2013 amounted to $2.79 million compared to $2.76 million in the prior year,” the Central Bank said.

“The accumulated assets of the fund increased by $4.5 million to $32.1 million at end-2013, of which $30 million was held in government bonds - an increase of $5.5 million over 2012.”

The dormant accounts regime is in the throes of legislative change, and the Central Bank revealed that in 2013, some 90 institutions transferred 885 accounts, where no activity has taken place for seven years, to it.

These accounts denominated in five currencies, were worth a collective $10.8 million. “At year-end the balance of dormant accounts proceeds, inclusive of investment returns, aggregated $69.7 million, of which US dollar and Bahamian dollar-denominated accounts accounted for 94 per cent and 5 per cent, respectively,” the Central Bank said.

Elsewhere, the Central Bank received 30 infiormation requests from 21 international regulators in 2013, processing 24 by year-end. Some six on-site inspections were conducted on Bahamas-based institutions in response to requests from home country regulators in India and Canada.

“The examiners found that the banks have generally adhered to the legal, regulatory and supervisory requirements,” the Central Bank said. “However, they made a number of recommendations on several thematic issues observed in the areas of the management of reputation risk, inclusive of the confirmation of the source of wealth for high risk clients, the periodic reviews of high risk clients, and the independence of the compliance function.”

The Central Bank added that regulatory capital in the Bahamian commercial banking system averaged 30 per cent at year-end 2013, and all institutions “held sufficient to withstand further significant deterioration in the level of non-performing loans in their loan portfolios.”

Bahamians with smaller credit card limits generally fell deeper into debt in 2013, while those with larger amounts focused on paying them down.

The number of credit cards issued with a limit under $5,000 rose by 4 per cent to 97,382, with the total value of outstanding debt up 11.4 per cent to $117.1 million.

“Similar gains were observed for cards issued with limits between $5,000 to $10,000, the number being higher by 3.7 per cent at 18,240 and value by 10.8 per cent at $68.6 million,” the Central Bank said.

“In contrast, both the number and value of cards carrying limits in excess of $10,000 declined by 4.8 per cent to 9,077, and by 24.2 per cent to $58.1 million, respectively.”

Debit card transactions increased by 2.8 per cent year-over-year to 5.2 million, with the value of these payments up 57.9 per cent to $6.6 billion.

When it came to the exchange control liberalisation under the Bahamian Depository Receipt (BDR) programme for broker/dealers, the sector applied for $2 million less year-over-year - some $13.2 million compared to $15.3 million in 2012.

The maximum available is $25 million, and the National Insurance Board (NIB) only used 75 per cent of its own $25 million foreign currency allocation for overseas investments.