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Central Bank Eyes Reform As Dormant Accounts Hit $95m

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank is pursuing reforms to legislation governing dormant bank accounts, which grew in volume by 10.2 per cent in 2016 to $95.3 million by year-end.

The banking sector regulator, in its newly-released annual report, said: “An analysis of the dormant account data showed that the cumulative number of facilities transferred to the [Central] Bank increased by 3,985 (10.2 per cent) to approximately 42,985.

“The corresponding dormant account balances totalled $95.3 million, denominated in eight currencies. In the context of reinvested earnings, total investments of the Dormant Account Fund totalled $81.2 million. Most liabilities were denominated in US dollars (65.5 per cent) and Bahamian dollars (21.8 per cent).”

Dormant accounts are those that have been inactive for seven years, whereupon they have to be transferred by financial institutions to the Central Bank.

The regulator added that it has submitted revisions to the Banks and Trust Companies Regulation Act 2000, and the Central Bank of the Bahamas Act 2000, dealing with the dormant accounts regime to the Attorney General’s Office for review.

“The proposed reforms will broaden dormant account protection from deposits to securities, and define the minimum period before which unclaimed assets would be handed over to the Government for liquidation,” the Central Bank said.

Outlining its strategy for the period to 2010, the regulator said it planned to deepen exchange control liberalisation as a tool to boost investment and economic growth, as well as improve associated administrative policies.

“In its advisory role to the Minister of Finance, and in its internal operations where delegated authority is already established, the bank will undertake a deepening of exchange control liberalisation initiatives, targeting both operational processes and policies,” the Central Bank said.

“An important goal is to considerably reduce the administrative drag of policies affecting current account transactions (trade and transfer payments). In addition, economic benefits from carefully sequenced and targeted liberalisation of capital or investment-related transactions will also be achieved.”

The Central Bank added that it was also focusing on regulatory reforms that tackled “emerging threats” to the Bahamian financial services industry, such as the global correspondent ‘de-risking’ trend.

It plans to “promote greater financial inclusion and consumer protection”, and place “emphasis on accelerated development and modernisation of the domestic payments system”.

“Such initiatives will continue to promote transparent oversight mechanisms that build confidence in the system, and reduce transaction costs,” the Central Bank said.

“The fledgling mobile payments sector has shown significant potential globally as a rapidly-growing component of electronic retail payments. The use of smart phones and near field communication (NFC) technology feature prominently on this platform.

“Domestic marketing is already taking hold in these areas. Interest in such solutions, as well as the [Central] Bank’s overall strategy to promote the use of less cash over the medium-term, are motivating the Central Bank’s intensified efforts to put a comprehensive regulatory framework in place for non-bank electronic payments solution providers. The [Cental] Bank intends to conclude this initiative during 2017.”

Elsewhere, the Central Bank noted that Bahamian electronic banking and Internet users increased by 13.2 per cent to 75,819 accounts, compared to 66,970 users the prior year.

Issued credit cards also increased by 18.2 per cent to 225,403 in 2016, a growth rate slightly behind the 19.8 per cent upturn the prior year.

“This gain corresponded with a 2.8 per cent increase in the value of the unpaid balances to $256.2 million, compared to a gain of 1.6 per cent in the prior year,” the Central Bank said.

“Growth was mainly associated with the $5,000 and under limit cards, which advanced by 20.5 per cent, while the value of credit outstanding for this category fell by 4.1 per cent to $111.6 million.

“Further, the number of cards with a limit of $5,000-$10,000 increased by 4.1 per cent. However, the corresponding value fell marginally by 0.9 per cent to $70.4 million. For cards with caps over $10,000, the number of cards grew by 13.2 per cent, and the relevant value rose by 20.2 per cent to $74.2 million.”

The Central Bank added that debit card transactions rose by 9.6 per cent year-over-year to 9.1 million, with the total value growing by 14.5 per cent to $1.4 billion.

“The reduction in the use of cheques noted over the last decade was sustained in 2016,” it said. “Processed instruments fell by 4.8 per cent to 2,611,102, following a 2.3 per cent fall-off to 2,743,184 in the prior year.

“Similarly, the associated value of these payments declined by 1.3 per cent to $7 billion, in contrast to an increase of 2.8 per cent to $7.1 billion in 2015.”

The number of Automated Teller Machines (ATMs) in operation in the Bahamas rose by 13.9 per cent to 393 last year.

“However, the volume of transactions decreased by 6.3 per cent to 10.6 million, while the corresponding value contracted by 30.3 per cent to approximately $2 billion,” the Central Bank said.

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