The Tribune

• Sets aspirational goal as feels industry ‘too tight’

• Industry raises Homeowner Protection concerns

• Banker says property tax issues need ‘ironing out’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister wants all Bahamas-based commercial banks to be able to open customer accounts within “a 24-hour deadline”, a senior banker revealed yesterday.

Kenrick Brathwaite, Bank of The Bahamas managing director, told Tribune Business that much of the sector’s recent meeting with Philip Davis QC was devoted to addressing the bureaucracy and red tape associated with opening bank accounts in a bid to resolve one of the biggest long-standing complaints among businesses and individuals.

“The Prime Minister’s position was that there are things the clearing banks can do to help consumers,” the BISX-listed bank’s chief confirmed. “His focus was on the islands, and inclusion and banking for everybody, so we were talking about digitisation of some kind, and account opening.

“He thinks we’re a bit too tight with the opening of accounts. He suggested everybody work towards a 24-hour deadline for the opening of accounts. He spent a lot of time on the opening of accounts, the time taken to open accounts in The Bahamas versus anywhere in the world, and that Bahamians and non-Bahamians have access to the banking system.

“For business, he wants a speeding up of that process, so that for persons coming into the country it doesn’t take six months to open an account. His message was more of a partnership than anything else,” Mr Brathwaite continued.

“One suggestion was that, for foreign companies coming in to do business via the Bahamas Investment Authority, vet them in all departments so they don’t have to go through the same process with the banks. Most of the debate was around the account opening process. There was a lot of discussion on that, quite rightly, because it’s a big thing in the ease of doing business.”

Bank account opening in The Bahamas has been seen as a deterrent and obstacle to doing business by many companies, investors and individuals ever since 2001, when this nation introduced an extremely rigorous Know Your Customer (KYC) regime that applied enhanced scrutiny to all new clients in a bid to escape the Financial Action Task Force’s (FATF) then-blacklisting.

The Central Bank has subsequently moved to ease bureaucratic overkill by pushing its licensees to adopt a risk-based KYC approach and reduce the identification and over information banks demand to verify a person’s identity and source of income, yet still the complaints persist.

Philip Galanis, the HLB Galanis & Company managing partner, last November blasted the commercial banking industry for “treating Bahamians like criminals” when it comes to opening account facilities. He argued that many felt they were treated as guilty until proven innocent, with protracted KYC scrutiny and associated delays undermining the ease of doing business.

“I can walk into any bank in the US and Canada and come out 15 minutes later with a bank card having opened an account,” the former PLP MP and Senator told a Bahamas Institute of Chartered Accountants (BICA) conference. “Bahamians are treated like criminals at the bank.

“I think it’s wrong, it’s unconscionable and certainly doesn’t help businesses incorporate and assist in opening bank accounts for our clients. There must be something we can do to remedy the situation.

“I think the banks are not paying attention to the Central Bank’s recommendations and directives because they have not relaxed their account opening requirements,” he added.

“Canadians in Canada do not have to face the scrutiny we face here in The Bahamas. Canadians do not have to face the difficulties we do. It makes it very difficult to do business in The Bahamas, and leaves a bad taste in our mouths that we’re almost criminals until proven otherwise.”

Mr Brathwaite, meanwhile, said the meeting between the commercial banks and Prime Minister also touched on the industry’s concerns with the Homeowners Protection Act. While this is designed to give Bahamians greater protection against banks and other lenders putting them out of their home if they default on their mortgage, in the sector’s view this has come with other consequences.

In particular, the introduction of the courts into the process of realising mortgage security on delinquent loans has made it more difficult for banks to recover their collateral and, as a result, they have become even more reluctant to extend credit to new borrowers or are doing so on more onerous terms.

“There are challenges going on with the Homeowners Protection Act,” Mr Brathwaite confirmed. “The intent was to protect the homeowner, but that intent could backfire on new prospective homeowners because that increases the risk that banks are faced with when they give mortgages to borderline accounts.

“We find the safest thing to do, as long as the Act is in place, is to stay away from mortgages where there is a high chance of it going bad, especially if the property is an area where there is little to no chance of it appreciating in value.”

Another topic of discussion with the Prime Minister and his Ministry of Finance team was real property, and the Government’s desire that the commercial banks assume liability for paying it on behalf of their commercial and residential mortgage customers while adding this sum on to their loans.

Outstanding real property taxes are a priority charge over property, ranking above banks and their mortgages, and Mr Brathwaite said: “That’s a liability for the banks as long as real property tax is outstanding.

“The real property tax discussion focused on collections and how real the liability is. We had a law firm look at the Act when it came into play. There are a few things that need to be ironed out. In terms of liability, if I don’t give satisfaction and another bank takes over responsibility [for the loan], who is responsible for the tax?

“If your mortgage is in arrears, do you have responsibility to pay that real property tax? When you combine the Real Property Tax Act and the Homeowners Protection Act, there are some inconsistencies which make it twice as difficult. You have to be comfortable and really certain that these borrowers are going to pay their bills.”

Mr Brathwaite and Gowon Bowe, Fidelity Bank (Bahamas) chief executive, both said the discussion was held from the perspective of the Government and industry working together to “expand opportunities” to grow and advance the economy as it emerges from the wreckage of COVID-19.

Mr Bowe, revealing that the commercial banks had sought the meeting with the Prime Minister and his team, added that they discussed “legislative matters” relating to the industry’s anti-money laundering legislation as well as real property tax, the Homeowners Protection Act and the opening of bank accounts.

“It was to understand the objectives of the Government, and give input on how legislation can be amended in order to best accommodate those objectives,” Mr Bowe said.