The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Opposition politicians yesterday questioned whether the Government’s decision to increase regulation and Business Licence fees for the commercial banking sector was driving the decision by Canadian-owned banks to increasingly outsource back office functions outside the Bahamas.

K P Turnquest, the Opposition’s Finance spokesman, queried whether the proposed Homeowner’s Protection Bill, and Mortgage Relief Plan - and the increased regulatory burden they represented - were partly a factor in CIBC First Caribbean Bank’s decision to cut 66 jobs from its Bahamian workforce.

He also urge the Government, and Bahamas in general, to adopt a proactive approach and discover why the commercial banks and other companies were increasingly outsourcing from the Bahamas, rather than “stand on the shore watching jobs leave”.

He told Tribune Business that CIBC FirstCaribbean’s actions were “a continuation” of what Royal Bank of Canada and Scotiabank, its two fellow-owned Canadian banks, have been doing and assessing.

Scotiabank, too, has confirmed plans to outsource certain back office functions from the Bahamas to Trinidad, although it is still going through the process of working out the details. Tribune Business understands that this process will be nearing completion towards the end of March, CIBC FirstCaribbean having been further advanced.

Mr Turnquest, meanwhile, told Tribune Business that there “seems to be some correlation, on the surface”, between CIBC’s decision and the increased 3 per cent Business Licence fee that was imposed on commercial banks in the 2013-2014 Budget.

Tribune Business reported last year that these fees had left the commercial banking sector facing an estimated 169 per cent increase in its total tax burden to $43 million.

“I would think that all things being equal, the increase in Business Licence fees must have played a role,” Mr Turnquest said, “and the banks have to contain costs some other way.

“We warned them [the Government] about this when we did the Budget last year, and the potential effect these fees could have, but they felt there would be no such negative effect.”

Mr Turnquest added that the Business Licence fee increase meant the industry had to focus on its operational expenses, of which staff/labour costs comprise around 50 per cent.

Mr Turnquest added that CIBC FirtstCaribbean’s move also spoke to the competitiveness, efficiency and high cost base of the Bahamian economy.

“It doesn’t bode well for our financial services industry,” he said. “Most of these jobs are middle class and upper class, so what’s the effect of that? Once again, the middle class takes it on the chin.”

Backing his colleague, FNM chairman Daron Cash said: “It is always troubling to hear of immediate or planned layoffs. We are always conscious of the impact these dramatic changes will have on the workers and their families.

“With respect to CIBC FirtstCaribbean, this issue has been on the drawing board for some time, and it is at least a positive sign that workers’ representatives have been at the table and able to monitor the planned restructuring to ensure that the best interests of their members are being protected to the greatest extent possible.”

Mr Cash added: “What is always disheartening to Bahamians is to hear that their jobs are being shipped overseas, especially to one of our southern neighbours.”

He argued that there had been “far too little” proactive focus on protecting Bahamian jobs and preventing them from going overseas.

“The tales of CIBC FirstCaribbean and Royal Bank shipping jobs to other Caribbean countries demonstrate the consequences of government’s neglect of this issue,” said Mr Cash. “We cautioned them [government] about doing too much, too fast in the area of taxation.

“Leaders of the banking community have also urged caution on the rate of new fees and taxes. It is now hard to separate the reality of the banks’ relocation of back office functions to lower cost jurisdictions from the Christie administration’s increased tax burdens.”

Superwash president, Dionisio D’Aguilar, said banks were facing a “new reality” as they were not able to generate the level of profits they had in the past.

“Businesses have to make decisions which are in the best interest of businesses. Banks are cutting so steep. What is this saying about our competitiveness? If they’re moving posts to another jurisdiction, clearly they see some saving in this. Clearly they would have done the numbers,” Mr D’Aguilar added.

“I think banking still remains the most profitable sector in the economy, albeit profits are probably down 50 per cent of what they used to be. I always felt that they slightly take advantage of the Bahamas because they set up their head offices in Trinidad and Barbados.

“The banks have a new reality. A mere five years ago they used to make an obscene profit. When I was president of the Chamber in 2007 and 2008, the three Canadian banks between them made roughly $300 million in profits, which at the time was more than the Bahamas government spent on education and defense, and the amount of money there were depositing in the Treasury was nominal. Rather belatedly the Government jacked up the taxes on them. The banks are facing a new reality now.”

Theresa Mortimer, president of the Bahamas Financial Services Union (BFSU), told Tribune Business the union was still in talks with CIBC FirstCaribbean, adding that the situation could have been much worse if not for the union’s involvement.

“We are meeting at the table and talking to each other, and looking for the best way possible for members of the union. If not for the union it could have been much worse. We’re still working,” she added.

As to the bank’s decision to outsource jobs to Jamaican, Ms Mortimer said: “It’s a community in which we live with outsourcing happening all around. In a way, you could blame the economy and a number of other things. The banks are not making a profit.”