The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Prime Minister yesterday said reform of the dormant bank accounts regime will immediately release $41.3m to help create a Bahamian Disaster Relief Fund.

Addressing the proposed changes to key financial services legislation, Dr Hubert Minnis said they would allow funds contained in accounts that have been unclaimed for “a minimum” 17 years to “be pooled, brought under the control of the Treasurer, and employed for the benefit of the people of The Bahamas”.

Pointing to the potential financial benefits, Dr Minnis said that at end-June 2018 there were 42,452 dormant accounts with a combined worth of $88.716m.

“Of the total number, 34,528 were Bahamian dollar accounts which were valued at $18.921m,” he told the House of Assembly. “Therefore, the average size for Bahamian dollar accounts was $548 compared with $7,837 for US dollar equivalent balances.

“There were 32,542 accounts, or 77 percent of the aggregate number of accounts, having a value of $500 or less for a total of $3.875m in dormant funds. Of this total, Bahamian Dollar accounts represented 80 percent or $3.116m.”

He added that dormant bank accounts with funds exceeding $500, and meeting the proposed 17 years dormancy threshold, totalled 5,724 with a collective value of $37.4m. “Of this amount, Bahamian dollar balances numbered 2,994 at a value of $7.584m, which represented 52.3 percent of the total number of accounts, but only 20.3 percent of the value,” Dr Minnis said.

“By comparison, balances in US dollar equivalents, at $25m and 2,519 in number, accounted for a lesser 44 percent of the number of accounts but a dominant 67 percent of the value.”

He added: “Since inception, that is, since 1989, claims have totaled $29.8m or approximately one-quarter of the $118.5m in original balances transferred to the Central Bank. The corresponding percentage for Bahamian Dollar claims is 19.2 percent and, for the US dollar equivalent component, 22 percent.

“We are advised by the Central Bank that, based on these legislative proposals, the Treasurer would receive an initial flow of at least $41.3m assessed at the end of June 2018, and a further steady stream of transfers as funds meet the 17-year threshold for extinguishment of claims should they not be claimed.”

Dr Minnis said these funds will be used to finance the proposed Disaster Relief Fund, rather than for the Government’s normal budgetary operations, given the urgency with which The Bahamas needs to create a buffer against the multi-million dollar reconstruction costs inflicted by increasingly frequent and strong hurricanes.

“It is not my Government’s intent to view this as a windfall for use in meeting normal budgetary operations,” the prime minister confirmed. “As a responsible Government, we are proposing that these funds be utilised for establishing the proposed Disaster Relief Fund that was foreshadowed in the most recent budget exercise.

“As a country, we are faced with the increased incidence and severity of hurricanes, which adversely affect fiscal sustainability and economic resilience. Members will recall that the International Monetary Fund (IMF), in its recent Article IV Report on The Bahamas, has placed the optimal size of such a fund at between two percent and four percent of GDP; that is, some $200 to $400m.

“We constantly receive inquiries from credit rating agencies, investors in the Government’s international bond and institutional lenders about definitive measures being taken by the Government to mitigate the risks associated with natural disasters, which could create havoc on our fiscal situation.”

Dr Minnis said insurance provided through the Caribbean Catastrophe Risk Insurance Facility (CCRIF) is not sufficient to meet all The Bahamas’ needs, and added: “Unfortunately, what used to be one in 100 year tropical events are now one in ten year tropical events.

“So for The Bahamas it is unfortunately not a matter of ‘if’ we will be hit by a major storm in the medium term, the question is only ‘when’. Any responsible government must plan accordingly and, when presented with an opportunity such as this, it must resist the temptation for short-term measures, and instead do the right thing with this windfall, and for the right reasons.”