The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A top Central Bank official yesterday said The Bahamas was aiming to roll out the “world’s simplest and cheapest” capital adequacy regime in compliance with the Basel III standards.

Charles Littrell, the Central Bank's inspector of banks and trust companies, told a Bahamas Institute of Chartered Accountants (BICA) webinar that the regulator's approach to implementing the worldwide regime had shifted significantly since the process began.

“I want to update you on some numbers from the last three years," he said. "When we started this requirements approach, we converted the old suite of recommendations into 216 requirements in 2017. Since then, our supervisory examiners have added 428 requirements across our supervised flock, which is roughly 100 institutions.

"What we started with, and what we added, is well over 600 requirements. Happily, the industry has cleared off about 540 of those, and one of the real benefits of what we’re doing is industry has responded well and we have seen a real gratifying increase in the speed at which identified issues are cleared.

"So, as of today, we only have 103 outstanding requirements; roughly one for every supervised institution," Mr Littrell said. "When we started this process, about two-thirds of the requirements had to do with financial soundness and one-third had to do with financial crime/risk management.

"That’s now moved to about 50/50 in the remaining requirements. We have also seen the average time to clear come down quite a long way. When we made this change, we also changed the way we wanted institutions to prove to us they had sorted out the requirements rather than telling us. The two most common forms of proof is a board certification or an internal board sign-off.

"The industry has cleared 541 requirements in three years. That’s really quite good, and we’re feeling like the industry got itself in good shape. We weren’t really preparing for COVID-19, but it helps that all of that stuff was sorted out before COVID-19.”

When it came to Bahamas-based bank and trust companies outsourcing portions of their services/operations to other providers, Mr Littrell said the Central Bank was "moving away from the pre-approval requirement to something that’s less onerous on us and the industry".

He explained: “A fair minority of the requests are not approved on the first go round. We’ll give feedback that says you haven’t been through the proper internal approvals and things like that. So what you will see in our new approach is we’re checking to make sure that the proper internal governance has been done, but we’re trying to avoid taking a business view on whether or not the outsourcing was a good idea or not.

“One reason we’re simplifying the process, and reducing some of the hurdles, is that the ultimate rejection rate in recent years has been quite low."