0

Minister 'Pledges' To Help Retain Rbc's Bahamas Book

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

and NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Minister of Financial Services yesterday “pledged” his support for Bahamas-based entities to acquire Royal Bank of Canada’s (RBC) private wealth management business, in a bid to preserve the 30 local jobs that will be impacted by the Canadian giant’s exit.

Speaking after RBC late last week revealed it would be withdrawing from the private wealth management business across the Caribbean, Ryan Pinder suggested the move provided a “tremendous opportunity” for Bahamas-based entities to acquire not only its client portfolio here, but those currently domiciled in Barbados and the Cayman Islands.

Mr Pinder said he was “personally committed” to explore how best the Bahamas could bring that RBC business to its shores, noting that the Canadian bank’s Cayman Islands portfolio was especially attractive.

Apart from private banking and trusts, RBC’s Cayman operation was also involved in captive insurance and investment funds.

Estimating that its size was “double” that of RBC’s Bahamas private wealth management portfolio, Mr Pinder said that bringing just half the Cayman business book to this nation would expand the local asset base by 100 per cent - translating into both job retention and growth.

But, to achieve this, two things needs to happen: The existing RBC Bahamas portfolio must be retained in this nation, and then a locally-based institution must acquire at least part of the Cayman book.

The main impact from RBC’s decision will be felt at Lyford Cay-based RBC Trust Company (Bahamas), although it is unclear whether all the 32 jobs there will be affected, and how quickly. There is no impact on its commercial banking business, as many Bahamians had feared at the weekend.

Mr Pinder yesterday said he understood there were around 28-30 Bahamian jobs at RBC Trust Company (Bahamas), but quickly pointed to a potential ‘silver lining’ for these employees and the Bahamas if events could be shaped to their advantage.

“It provides an opportunity for Bahamas-based firms to look at the business,” he told Tribune Business. “It’s my understanding that RBC is entertaining offers for different parts of its private wealth portfolio......

“It gives Bahamian entities a good opportunity to look at acquiring a book of business.”

Mr Pinder said potential purchasers could be the Bahamas-based affiliates of international banks and trust companies; Bahamian-owned entities and new investors/entrants to the local financial services sector.

“I think it represents a tremendous opportunity,” Mr Pinder reiterated. “I’ve spoken to RBC. I’ve also spoken to interested parties in the Bahamas.

“I would be very supportive, and have pledged my support, to see how the book of business could be acquired and remain in the Bahamas.”

Setting his sights beyond the Bahamas, the Minister said job creation, rather than just preservation, could be possible if this nation - and its financial institutions - could bring some of RBC’s Cayman and Barbados-based business here.

“There’s a tremendous opportunity to look at acquiring business portfolios from elsewhere and bringing it here,” he told Tribune Business.

“I’ve committed myself, as the Minister, to help see how best we can cause a transition for that business to be here in the Bahamas.”

Estimating that RBC’s Cayman private wealth management business book was twice the size of the Bahamas, Mr Pinder added” If we could attract half the business of Cayman, it would essentially double the private wealth book here.”

RBC’s withdrawal from the Bahamas’ private wealth management sector still represents a blow, given the potential job and business portfolio losses that will result, together with the loss of a ‘blue chip’ banking brand.

The financial services industry has been vital to the development of a Bahamian middle class, and RBC’s impending exit will threaten both direct and indirect employment, in addition to sucking spending out of the economy.

Mr Pinder reiterated that RBC’s region-wide private wealth pull-out was a corporate decision, made for strategic reasons by its Toronto head office, and had nothing to do with the Bahamas as a jurisdiction.

However, he questioned RBC’s strategy, which seems designed to focus on ‘onshore’ private wealth markets in the G-8 countries, and ignores fast-growing areas such as Latin America.

“I personally don’t think it’s the best strategy, because I think everybody sees growth in Latin America. It’s a bit interesting,” Mr Pinder said.

Others in the Bahamian financial services sector also share the Minister’s view. Top Lombard Odier executives recently told Tribune Business that they planned to use the Nassau office as a “hub” for Latin American expansion, while Banque Havilland unveiled intentions to do the same via last week’s acquisition of Bahamas-based Pasche Bank & Trust.

The RBC developments will now overshadow the ‘positive’ news of Banque Havilland’s market entrance.

Mr Pinder said Pasche had been “essentially winding down for the last few years”, and its purchase would give the institution “new life” via its new owners.

Still, the RBC move highlights the continuing vulnerability of the Bahamas, and its financial services industry, to the vagaries of head office decisions and international economic developments, due to the sector largely being foreign-owned.

“That’s nothing new,” Mr Pinder said. “That has been the case in the Bahamas financial services industry since RBC first came here, since the Swiss banks came here.

“That’s an element of risk the Bahamas industry has always experienced. It’s an international industry, so decisions are made by head offices and not in the Bahamas.”

Apart from its wealth management business in the Caribbean, RBC is also closing some international advisory businesses in Canada and North America.

The bank, though, said it was ‘premature’ at this point to estimate how many employees would likely be affected.

The move follows a Caribbean-wide restructuring earlier this year, with RBC selling its Jamaican operations to Sagicor.

RBC spokeswoman. Claire Holland, in an e-mail to Tribune Business, said RBC Wealth Management was realigning certain businesses within its international operations as part of “a focused strategy that will enable it to achieve sustainable, controlled growth in its priority markets”.

“RBC Wealth Management will be exiting our Wealth Management – International business in the Caribbean, as well as certain international advisory and international private banking groups in Canada and the US,” she said.

“We have also commenced a strategic review of our RBC Suisse business. These changes represent a small segment of our RBC Wealth Management business.”

This latest move by RBC could reportedly affect some 300 employees, but Ms Holland said: “As we are currently considering a number of strategic options for these businesses, it would be premature at this stage to estimate the number of employees impacted.

“We know this is difficult for our employees and we are committed to providing all employees with support and assistance throughout this time of uncertainty. These decisions in no way reflect the quality of our employees or our clients but are the result of a strategic review.”

Fellow Canadian banks, CIBC FirstCaribbean International Bank and Scotiabank, have also initiated downsizing to cut costs and combat heavy loan losses that have reduced profitability in both the Bahamas and the Caribbean.

Back in January, Scotiabank (Bahamas) announced plans to “centralise’ some of its Bahamian back office functions into its Trinidad & Tobago hub. And, earlier this month, it announced plans to cut 1,500 jobs, roughly two-thirds of them in Canada, as it restructures its operations and closes 120 branches in the Caribbean and Mexico.

And in February 2014, CIBC First Caribbean International Bank (FCIB) announced plans to cut 66 jobs from its Bahamian workforce, revealing that those posts would be outsourced to Jamaica.

Comments

observer2 2 years, 4 months ago

I commend Minister Pinder's proactive approach to retain the business and jobs in the Bahamas. I trust that all the jobs can be saved.

However, large global institutions are challenged to justify operations in "small" Caribbean centers for many reasons:-

  • too many small markets so economies of scale are difficult to achieve
  • too many different and ever changing laws, regulations and compliance issues
  • G20 tax compliance and money laundering concerns
  • Facta compliance for retail bank accounts, cost prohibitive?
  • flat to declining GDP in most caribbean countries, no engines of growth
  • dramatically increasing bank license fees and general taxes (VAT in Bahamas)
  • antiquated centralized parliamentary democracy models can't be adapted for the Information Age
  • heavy loan losses in region due to most businesses being marginal to unprofitable
  • legalization and proliferation of domestic gambling (numbers) businesses (Bahamas, Haiti, T&C, Bermuda etc.). International banks carefully assessing reputation all risks.
  • high crime levels, no one feels safe
  • high energy costs
  • "D" national average creates staffing challenges
  • lack of investment in technology, innovation in front end investment management products. Best done in Canada
1

Well_mudda_take_sic 2 years, 4 months ago

Minister Pinder is about as daft as they come when it comes to his knowledge of what wealth management/private and international banking are all about. The wealthy clientele of RBC's closing businesses in the Caribbean and the Bahamas have either already left or are about to leave the Caribbean for the very same reasons that RBC sees no future for these lines of business in our part of the world. Even the most super wealthy private banking clients of this world have concerns about corrupt governments like ours (and Jamaica's) that show an increasing propensity to gather sensitive information about their financial affairs and intervene in their financial activities under the guise of having to kowtow to outside interests like the U.S. Govt (IRS/FATCA) with similar highly intrusive initiatives on the horizon from the OECD countries. Rinky Dink Pinder's small mind just can't grasp that RBC is walking away from the Caribbean because it's most profitable clients have decided they have had enough and have been walking away to more friendly and stable business jurisdictions at an ever increasing pace in recent years as the Bahamas teeters on the precipice of its own financial ruination as a country. Wakey, wakey, Pinder! RBC will not be leaving profitable clients anywhere in the Caribbean for others to pick up at a bargain basement price as you suggest. The clients have walked away from the Caribbean and the Bahamas therefore RBC is walking away. Times sure is a changin' in our banana republic....but you, Pinder, seem to be stuck in the past as our banking industry collapses around you and your PLP government!

1

GrassRoot 2 years, 4 months ago

I agree, other than specialty products and services the Bahamas will not be able to offer anything going forward. Global Custody, ease of doing business, regulated environment, efficient court system, transparency are key for the new banking client. What Lombard Odier's management recently said about the Bahamas should be translated as follows: "We can not keep tax dodgers from South America on our books in Switzerland any longer, that is why we want to expand the operations in the Bahamas and ship out these client accounts to Nassau." That hide and seek game will be done and over in the next round of regulations from the OECD. The Bahamas as missed various opportunities to secure its financial market. Time to switch off the light and close the door.

0

BahamaPundit 2 years, 4 months ago

How can I add to such amazing responses as those two previously articulated. Both of these posts should be published in the daily news, as they are more knowledgeable and erudite than any of the blather that spills out of the mouths of our politicians and is printed. Excellent posts!!

1

John 2 years, 4 months ago

Anyone with common sense knows that the primary reason the wealth management business has dried up in the Bahamas and Caribbean is because clients no longer feel that their investments are secure and out the reach of the United States and other countries that they may be citizens of. The United States have powers that overrule bank secrecy laws and so clients have run shy of this jurisdiction. Then there are recent money laundering laws and suspicion of funding terrorist activities legislation that give the US government even greater powers to go after suspicious bank accounts. So wealthy clients are either deciding to keep their money at home and pay tax on it or go further away to hide their money and avoid taxes on it.

0

banker 2 years, 4 months ago

Again, I would like to emphasise (and co-sign) Bahamas Pundit comment that the first two commenters are spot-on! I have been in wealth management and trust management area for the major banks, and two of the biggest clients in the Caribbean (billionaires both) have already departed along with their money (and selling their homes in the Bahamas). The exodus and capital flight has been going on since 2010 and the more prescient High Net Worth Individuals saw the writing on the wall earlier. The two biggest clients mentioned above have respectively repatriated their money to Switzerland and the US, electing to pay taxes in stable, non-corrupt jurisdictions with modern infrastructure including the ability to trade investment derivatives and cash cheques instantaneously.

The concept of the tax haven is dying and the current "customers" propping it up, are the persons who's dodgy money wants to avoid oversight scrutiny, or High Net Worth Individuals from Latin America who need a safe place as a shield from potential political turmoil and regime changes through juntas, etc. Singapore is the fastest growing tax haven servicing the Asian markets and those fleeing from Caribbean outposts. Cayman Islands is at least trying to diversify by attracting knowledge industries.

Pinder is living in the past, and the government has its head in the sand, and cannot see the writing on the wall, until the wall crumbles to dust and disappears.

Nowadays with the chartered Canadian, American and European banks, they are not content to just hold money any longer, they must know that that the funds are legitimate and legitimately taxed in the jurisdictions of residence of the beneficial owners. The Chinese walls and screens are all coming down. Ironically, I have heard an ex-Governor of the Central Bank say that if we modernise our banking infrastructure, and became total legal and compliant with FATCA and OECD, we would get business from America, solely because the banks are NOT American. Unfortunately it is too late now, as the investment required to do so would be not generate a sufficient return.

This make both pillars of economy slowly outdated and redundant in the fast-paced outside world.

1

Sign in to comment