The Tribune

EDITOR, The Tribune.

This past weekend, I released a brief outline of the key reform efforts that the FNM believes are necessary to create a more dynamic, competitive and inclusive retail banking sector in The Bahamas.

We encouraged the government to move past talking about the issue, and we pledged to advance necessary reforms if the current administration does not act before our return to office. We were pleased to see Minister Fred Mitchell react positively to our position, foreshadowing that the Davis administration may take action. We would support any substantive move forward in this regard.

Not everyone was happy with our proposal, though. Some reacted with predictable opposition to what we maintain are necessary and straightforward recommendations. Unfortunately, much of the critique so far does not speak to what the FNM actually put forward.

I’ll say it again: The FNM has always supported a strong and vibrant free market in The Bahamas where private businesses can compete and seek profits. This naturally applies to commercial banks operating in the domestic space. We have not and do not advocate for fixed price controls or anything of the sort. Financial service providers must have the flexibility to set prices and rates in a way that allows them to be competitive and profitable.

At the same time, we do not apologize for saying the regulatory regime should ensure that bank fees are fair, transparent, and conducive to promoting the broadest possible access for Bahamians to the formal banking sector.

Our ambition must be much more than tackling ever-increasing bank fees; We in the FNM believe the banking sector in The Bahamas needs more competition and dynamism. Our proposals speak to this.

We plan to make it easier for Bahamians to open a bank or become authorized financial service providers. The application process and criteria will be clear and publicly available, with transparent evaluation mechanisms and timelines. If applicants meet the core requirements, they should be granted a license to operate. We will do what we can to expand banking options for Bahamians.

Right now, it takes too long to open a business bank account and conduct many critical transactions.

According to a June 2023 survey by our Central Bank, applications for a new business account took, on average, over two months to be processed. Two months! Only 11 percent of accounts were opened in a week or less. Unsurprisingly, almost 80 percent of respondents were dissatisfied with how long it took to open their bank account.

To make our banking sector more dynamic, we will require the Central Bank to set ambitious standards for efficient in-bank and inter-bank transactions. We know that strict global Anti-Money Laundering protocols force The Bahamas to comply with tougher KYC requirements than other financial centres. This can be considered an opportunity for our country to be more innovative and efficient—to do more in less time.

For example, the Central Bank, in concert with the clearing banks, should develop and implement a blockchain-based Know-Your-Customer (eKYC) portal that would enable all Bahamians and Bahamian businesses to securely upload KYC information with a click of a button. This would save customers time, allow banks to process applications more promptly, and make our banking sector more efficient and agile. The government of The Bahamas must give the mandate for this to be done.

To strengthen the vitality of our financial sector, banks need more opportunities for business in their core function as financial intermediaries in the country. The Bahamian government must do its part by updating legislation and policies—especially around home mortgages—that, while well-intentioned, have stifled the housing market.

The government should better leverage concessionary financing from multilateral banks like the IDB to provide guarantees for local banks lending to Bahamian small and medium-sized businesses. This is crucial for expanding home ownership and increasing capital for Bahamian entrepreneurs. It would also help domestic banks focus more on lending, reducing their reliance on fees and charges for income.

The FNM’s preliminary proposals for consideration exist in an environment where many desire reform but have not formally stepped forward or have been invited to share their views. In other words we have brought reform to the forefront of public conversation because those who should be doing more have not adequately stepped up to the plate.

Much of what we’ve said is not new. Those who follow global trends in retail banking would be keenly aware that other countries have taken recent steps to protect consumer interests and to ensure fairness and transparency in banking fees.

The Biden administration in the United States announced through its Consumer Financial Protection Bureau in October 2023 that it was cracking down further on what it termed to be “junk fees” charged by financial service providers while requiring greater transparency on the disclosure of legitimate charges levied by banks and credit union customers.

Around the same time, Canadian government announced what it described as “new measures to ensure that Canadians are treated fairly by their banks”. These included planned requirements for banks to offer low-cost bank accounts and more online banking features at no cost to customers. The Canadian government also consolidated consumer financial ombudsman services and made that office more independent.

Closer to home, the Barbados government secured its commercial banks’ commitment this past July to adhere to new “Market Conduct Guidelines” issued by the Barbadian Central Bank. These new guidelines mandate several important undertakings: Banks must now obtain the Central Bank’s non-objection for fee increases; they must provide an extended notice period to bank customers before introducing or increasing fees; they have eliminated charges on low-value electronic transfers; they must offer improved access to in-person and electronic banking services for persons with disabilities; and they must implement more efficient and responsive bank account opening protocols—with a goal to open even business accounts within five days.

Just as other governments have recognized the need to enhance consumer protections and push for more inclusive and more efficient banking services, so must the Bahamian government. Big and small countries are managing to undertake necessary reforms without undermining the viability of their banks.

We certainly can—and must—do the same.

Of course, before proceeding, an FNM government will earnestly consult with the Central Bank, the commercial banks, civil society, and Bahamian citizens to incorporate their best ideas. Over the coming days, we expect to meet with the Central Bank and the Clearing Banks Association to keep the ball rolling in the right direction.

What we will not do, though, is accept that we cannot improve the efficiency, quality of service, and reach of banking services in The Bahamas. The people of The Bahamas deserve better.

Michael C Pintard

Leader of the Free National Movement

August 25, 2024.