By NEIL HARTNELL
Tribune Business Editor
The Central Bank's governor yesterday pledged to deliver "greater transparency" on commercial bank fees as the country's first credit bureau prepares to start issuing reports by the 2021 second quarter.
John Rolle, addressing the Bahamas Business Outlook conference, said the banking industry regulator was also focused on providing Bahamian financial services consumers with greater choice and protection as he promised that the "Financial Services Ombudsman" post will be established early this year.
Arguing that the development of a savings culture, and mobilising such resources, was vital to spur greater investment and economic growth, Mr Rolle said The Bahamas also "needs to get to the finishing line for completing the regulatory framework for private pension schemes" as these represent a potentially significant funding source.
"The Bahamas has to achieve more significant development of non-bank channels to direct capital to the private sector, exploiting channels that the securities industry might promote," he added, outlining that digital transformation and payments systems reforms were also critical for the financial services to play its part in fostering economic growth.
However, Mr Rolle warned that Bahamians "will also have to embrace the implications of what it means to achieve greater efficiencies in financial services" as he predicted that commercial banks will further shrink their branch networks and shed jobs as they shift to digital mechanisms to deliver products and services.
Acknowledging that "governance, transparency and consumer protection will also require bolstering", Mr Rolle said the Central Bank planned to start by producing more openness around commercial bank fees that have long drawn the ire of consumers.
"One near-term deliverable will be publication of more comparable information on the fee structure of financial products across banks, using a standardised template that has been already developed. This would promote more informed choices across products and services being provided by competing institutions," he argued.
"The bank will also consider what regulatory avenues can be exploited to promote transparency around fee setting practices under the Payment Systems Act. In addition, as regards mobility and choice, the Central Bank will explore medium-term reforms around the feasibility of open banking, having full regard to regulatory proposals that would encourage product development, but keep consumer protection in full view.
"From an inclusion perspective, we will also explore the feasibility of incorporating universal access criteria into the basic product mix of financial institutions through potentially a basic, no-frills, fee- regulated instrument that each institution would have to provide."
Conceding that improved access to credit was critical to transforming savings into investments, Mr Rolle said the credit bureau would provide a significant boost by establishing transparency surrounding the creditworthiness of all borrowers.
"The bureau’s credit information reports will help to reduce uncertainties around the quality of potential borrowers, improving the medium and long-term access to both business and personal credit," he said.
"The bureau, which was licensed at the end of 2019, is now setting up operations, and should begin to produce live credit reports data by start of the second quarter of 2021. Commercial credit reports will start to be generated in a subsequent phase of operations."
Mr Rolle reaffirmed that the Central Bank was working with the Ministry of Finance to develop a "government savings bond" scheme, which would allow ordinary Bahamians to invest in and build-up holdings of government paper to improve their savings levels.
The regulator is also investigating the creation of a collateral registry for commercial lending. "This would establish security against a range of moveable, even intangible assets," Mr Rolle added.
Promising that the Central Bank will remain focused on "gradual exchange control liberalisation", he said: "Our recent accommodations have favoured use of licensed trust companies, with the authorised agent status, as outlets for self-managed portfolio investments.
"However, progressive reforms will also be explored to promote increased use of BISX-listed depository receipts (BDRs) marketed by the local broker/dealers firms that finance purchases of securities listed on foreign stock exchanges."
Noting that the Ministry of Finance last year agreed with the commercial banks to target an 80 percent reduction in cheque use over five years, and a 50 percent decline in domestic cash over the same period, Mr Rolle said: "At present about nine out of 10 surveyed adults in The Bahamas have access to at least a savings account at a bank or credit union.
"At least 86 percent of the adult population have access to smart mobile devices, and there is high awareness of new mobile payments products, including the central bank digital currency, the Sand Dollar, that is being rolled out nationally."
This suggested there was a fertile customer base for electronic payments and mobile wallets, but Mr Rolle said the latter were no substitute for interest-bearing deposit accounts - they merely facilitate payments.
"In 2021, the Central Bank will also develop complimentary streamlined guidance to ease the account opening process for businesses," the governor added. "As part of the Sand Dollar infrastructure, the Central Bank is finalising an electronic customer due diligence or e-KYC system. This would eliminate distance and remoteness as a factor in establishing financial relationships, and be available as a tool for all financial institutions."