The Tribune

• But Central Bank pledges consumer protection regime

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will cause more problems than it solves if it seeks to “cap” bank fees without first tackling “structural inefficiencies” in the industry, the Central Bank’s governor warned yesterday.

John Rolle, speaking at the regulator’s 2023 first quarter economic briefing, pledged that it is developing “a suite of recommendations” to address consumer financial protection concerns related to the cost of, and access to, financial services throughout The Bahamas.

However, he argued that there needs to be a “comprehensive approach” to addressing these issues amid arguments by Fred Mitchell, minister of foreign affairs, in the House of Assembly last week that the Government may need to intervene with legislation to address banking industry challenges amid a growing chorus of complaints from Bahamian consumers.

Mr Rolle said the Central Bank does not have a “negative stance” towards the Canadian-owned commercial banks and other institutions outsourcing back office and other functions to other Caribbean nations if it results in financial services being provided more cheaply and cost-effectively to local consumers. The outsourcing of call centre functions to the likes of Jamaica and Trinidad was among Mr Mitchell’s primary complaints.

Reiterating his and the Central Bank’s belief that commercial bank fees and other costs are “symptoms” of the cost of doing business in The Bahamas and other factors, the Governor nevertheless left room for the end-2024 deadline for the elimination of cheques to be altered. He added that a “steering committee”, featuring representatives from the banking industry, insurance, credit unions, government and private sector, will advise on the timeline’s “feasibility”.

Mr Rolle also denied he was “disappointed” that just over $1m worth of Sand Dollars, the digital version of the Bahamian dollar that is backed by the Central Bank, are presently in circulation amid concerns that the adoption has been relatively slow. He described the transition as “a journey”, and added: “It’s not expected to happen overnight.”

“I just want to say there is a continued trend in the banking sector to identify efficiencies where they can find these and, therefore, we see a lot more regionalisation of operations,” Mr Rolle said, pointing out that outsourcing works both ways, with some Bahamas-based functions supporting operations in other Caribbean countries.

“We manage this against the other risks that may be present in the banking operations. When we look at how these services can be delivered more positively in the minds of the consumers, the Central Bank is taking a holistic approach looking at consumer protection issues in the financial sector and, as we go through that exercise, we are going to be putting together a suite of recommendations to address issues in the banking sector.

“But there isn’t any negative stance in the Central Bank’s policy approach to banks around outsourcing, and we allow... banks to become more efficient in how they provide services. However, we are going to put more emphasis on how consumers are satisfied around reliability and access to services. We are not insensitive or unaware of the concerns, but we have to take a comprehensive approach in terms of how we deal with these issues.”

Promising that “there will be a consumer financial protection regime in The Bahamas”, Mr Rolle said the Central Bank is already dedicating resources to “formulating some of the issues that will be addressed in that framework”. He acknowledged that Bahamian businesses and consumers all have a vested interest in how the commercial banking sector’s drive for cost savings and efficiencies will impact them.

“We all have an interest as users of the banking system to reduce the cost of operations and the impact of those costs on us as users,” the Governor said, “so we are looking at how we make the banking sector more efficient overall. Let us also understand that the fees and the adjustments in the service are symptoms around how the financial services providers are responding to the environment in which they are operating.

“So the Central Bank’s objective, first of all, is to get everyone to appreciate we have inefficiencies in the banking sector, as well as policies and reforms such as digitisation, but making sure persons have access.... to the digital platform that services are provided from.

“That is an area where we can make interventions, but we address comprehensively the areas where we can make the system more efficient and prepare users of the system to operate within the system when the modes of delivering services changes.”

Mr Rolle said Bahamian consumers need to better understand, and recognise “what are the structural issues that are linked to inefficiencies in the banking system. Because if we do not address this we will not solve the problem by capping fees. We will cause other problems to arise in the system. We have to address the structural issues and that is where there is a lot of work that the Central Bank is putting emphasis on”.

As for the drive to reduce, then eliminate, the use of paper cheques as a payment mechanism by end-2024, Mr Rolle said the Central Bank was finalising the consumer education drive to facilitate this initiative in conjunction with the private sector steering committee.

He added that the committee will “be looking at a range of issues around reducing reliance on and usage of cheques”, and it “is going to help guide the Central Bank in terms of assessing the 2024 timeline as well as the feasibility of adjusting that timeline” - an indication that it might not be set in stone yet.

Mr Rolle said this work will be undertaken “before we get to the second half of 2023”, with the education campaign set to launch during the latter part of the year. Promising that this will focus on the virtues of using digital and other alternative payment means, he added: “The education campaign is not about persuading anyone that we need to get rid of cheques”