The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor yesterday said the creation of a Bahamian Financial Stability Council will help “develop a playbook” for how regulators and the Government manage an industry “crisis”.

John Rolle, addressing the regulator’s 2022 year-end and fourth quarter economic briefing, said moves to establish such an entity had “not been triggered” by any current concerns regarding the stability of the Bahamian financial system.

Confirming that its membership will be comprised of financial services regulators, such as the Central Bank and Securities Commission, as well as relevant government agencies and ministries, he added that its role will be to provide “co-ordinated oversight of the financial services sector” and allow for a collective response to any systemic threats.

The Governor was replying to Tribune Business questions after the Financial Stability Board discussions were revealed by Karen Rolle, the Central Bank’s inspector of banks and trust companies, in her 2022 fourth quarter newsletter to the regulator’s licensees.

“In the context of resolution, the Central Bank is also leading an initiative with other local regulators and the Ministry of Finance to establish a Financial Stability Council (FSC). The FSC would be a non-statutory inter-agency body established to monitor and review emerging risks that might impact financial stability, as well as facilitate regular discussions and system-wide analysis on the financial strength of systemically important financial institutions in The Bahamas,” she wrote.

Confirming this was accurate, Mr Rolle said the initiative was “not triggered by any concerns about the state of financial stability, but it’s really informed by the evolution of the work we’re doing in The Bahamas to strengthen co-ordinated oversight of the financial services sector.

“The purpose of having a Financial Stability Council or group that spans regulators, and even draws in the Government itself, it is recognising [there are] instances when a response might be needed, or in instances where medium or long-term projections suggest problems could be on the horizon or it’s necessary to take measures that span across a single set of institutions that may be required,” Mr Rolle added.

“From that point of view, the Financial Stability Council, it becomes useful in developing a playbook for how we should react in a crisis, as well as focusing on certain standards that should apply consistently in terms of the behaviour, particularly in terms of lenders or borrowers and investment markets so that the system evolves in an orderly fashion.”

The Governor, who gave no timelines for the Financial Stability Council’s creation, added that it will also enable the Government and financial services regulators to “collectively monitor how things are evolving in the economy and pose questions to ourselves. And, if we are not satisfied, to be able to agree on what should be the collective intervention”.

Elsewhere, Mr Rolle described plans to create a movable collateral registry as “a very important project for the Central Bank in 2023”. He added that the goal was to finalise the enabling legislation and legal framework this year, and for the BIll to go “through the Government approval process” although he made no mention of Parliament.

The Central Bank previously released the Movable Property Security Interest Bill 2022 for consultation and feedback as it seeks to transform secured lending in The Bahamas by enabling entrepreneurs, start-ups and micro, small and medium-sized businesses to pledge mobile assets - such as vehicles and equipment - to lenders as security for credit they extend.

So-called “intangible assets” - accounts receivables (factoring) and intellectual property rights - could also be used as loan collateral under the Bill, with the registry securing the rights of both lenders and borrowers by registering liens, mortgages and other charges over such assets.

Mr Rolle, identifying the registry as an initiative that will receive the Central Bank’s focused attention from the 2023 first quarter onwards, said the regulator will issue a Request for Proposal (RFP) to identify someone to develop the registry’s electronic, online infrastructure.

“We’ll also be communicating back to the Government on the legal framework that’s proposed and will be part of the consultation,” he added. “We should expect this year that the legislation will be finalised and taken through the Government approvals process. We’re going to be intensely focused around the execution of the platform for the collateral registry.

“There’s one aspect of that which will come out in the public consultation. It’s not a difficult issue to resolve, but it’s an important one. What does this registry look like, and who operates it? We know it will be digital and online, but we need to be careful not to build too much super structure to support the collateral registry. There will be some important decisions around how we source operations of the registry,”

Mr Rolle, arguing that “net oversubscriptions” for the Government’s Bahamian dollar debt show institutional investors are not yet at their prudential and regulatory limits in terms of how much they can acquire, added that the proposed “savings bond” - designed to encourage small, individual investors to save and give them access to higher return-yielding securities - will “come on stream over the course of 2023”.

Confirming that the Central Bank is “very close to sharing” the work it has done on the initiative with the Ministry of Finance, he said: “It targets the smaller individual, retail investor that takes a disciplined long-term approach to saving.” Mr Rolle also asserted that it is “not a stop-gap measure for the Government’s financing needs”.