The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas must find new “value propositions” to help overcome the threats facing its financial services sector, a former Cabinet Minister urged yesterday, suggesting that this nation seek to attract more institutional business.

Ryan Pinder, the Graham, Thompson & Company attorney and partner, told the Rotary Club of West Nassau: “I do think we have value propositions. We have to find new ones and put them in place. We have to recognise that where we were is not where we have to go.

“If we depend on a legacy way of doing business in the industry, we will collapse. If we find new and innovative value propositions, I think we can differentiate ourselves from every other financial centre.”

Apart from seeking to attract ultra-high net worth individuals to the Bahamas, Mr Pinder also called for the pursuit of institutional business. 

“If we can attract more institutional business to this jurisdiction, get pension funds, hedge funds, private equity funds, the high dollar premium type of business, these types of financial services that are more commercial and institutional, you get more revenues, a wider scope of industry and the correspondent banks would want to be here,” he added.

“I propose that we should set up a commercial and trade finance campus in Freeport, similar to what they do in Cayman. Bahamians have to be less xenophobic on this, but in this campus I want Goldman Sachs to come or JP Morgan to come and bring their trade finance, where they are financing international trade, doing short-term commercial paper, doing currency swaps, hedging, all the stuff that New York, London and Miami and everybody does. Many Bahamians working in these industries stay in New York and London because we don’t have these industries in the Bahamas.”

  Mr Pinder said there were three main threats to the financial services industry at present. “Historically, our value proposition has been that we are a jurisdiction that values, respects and ingrained in our law financial privacy to our clients,” he added.

“Ingrained in our law are very strict banking rules with respect to the disclosure of people’s financial information. That has historically been our value proposition, and that is where we have seen a lot of growth and development in the industry.

“The international movement of transparency has effectively eliminated our value proposition as a jurisdiction in financial services almost overnight. Our value proposition has been effectively eliminated.”

    The second threat, Mr Pinder said, relates to the operational viability of bank and trust companies. “Historically, our banks not only operated as a bank but they managed client assets,” he explained.

“They managed  the type of investments they were making and the growth of those portfolios. In those days, the banks were highly profitable. Today, a lot of that management of assets is done externally; outside the bank.

“The revenues of those banks are almost cut in half, and maybe in some instances more than half, which creates revenue and operational pressures on these institutions. Those institutions then said they were going to make their money on trading. They are not making as much money lending money, so they are making it on their fees. There are operational threats, revenue threats on our banks that need to be addressed.”

Mr Pinder continued: “The third major threat I see in our jurisdiction in financial services has to do with de-risking. If we are unable to process US currency in our banks, our entire economic  platform collapses.

“The withdrawal of corespondent banking in the region and in the Bahamas threatens the economic survivability of not only the financial services but the economic platform by and large.”