The Tribune

By ANNELIA NIXON

TRIBUNE Business Reporter

anixon@tribunemedia.net

THE BAHAMAS’ financial services sector must balance compliance with efficiency and competitiveness, a Cabinet minister and senior industry executives and regulators asserted yesterday.

Michael Halkitis, minister of finance, told the Nassau Conference on financial services that quality of life as an important component of The Bahamas’ strategy to attract investors to domicile in this nation, particularly as it seeks to encourage establishment of family offices.

However, he acknowledged that The Bahamas’ small size leaves it particularly exposed to decisions made within the international financial system. “We recognise we’re a small country,” Mr Halkitis said. “I heard the term compliance complaint. And so we make that case as to, for example, we spoke about tariffs recently. I guess maybe a year ago… we found ourselves subjected to a 10 percent tariff… We get caught up in these things.”

He described the country’s approach as one in which The Bahamas complies with international requirements while also challenging measures it considers unfair. The minister said The Bahamas has advocated for a more neutral international regulatory framework, including through discussions at the United Nations (UN), arguing that rule-making should not place smaller jurisdictions at a disadvantage against their competitors.

Mr Halkitis said the consequences of international financial sanctions or adverse listings are particularly significant for a small jurisdiction that depends on access to the global financial system.

“And so we’re small,” Mr Halkitis said. “We have to comply. We’re dependent on the international financial system. Blacklisting or greylisting or any adverse listing, no matter how unfair it is or how unfair we feel it is…it has an impact...”

Christina Rolle, executive director of the Securities Commission of The Bahamas, similarly stressed that maintaining the country’s credibility is fundamental to its ability to attract and retain international capital.

“Our job is to make sure that Thje Bahamas is a place where capital is safe,” Ms Rolle said. “So what that means is that we must have fair rules, we must have predictable decisions, we must have proportionate supervision, we must also have firm enforcement when it’s needed.”

Ms Rolle said strong accountability gives Bahamian firms greater access to global markets and the international banking system.

“So we can’t trade away credibility for speed, but that doesn’t mean that credibility and responsiveness are opposites,” Ms Rolle said. “A regulator can be both rigorous and efficient.”

She said co-ordination between government, regulators and the private sector is also critical because The Bahamas is assessed internationally as a jurisdiction rather than as a collection of separate agencies.

Ms Rolle also urged financial services firms to view governance and compliance as an advantage rather than simply another operating expense.

“I think industry also needs to treat good governance as a competitive advantage, not as a part of costs… but rather as a competitive advantage,” Ms Rolle said.

The Securities Commission said the country must also ensure its legislative framework keeps pace with financial innovation and international standards, particularly as the requirements governing global financial centres continue to evolve.

“We know these goalposts are constantly shifting, and it is important for all of us to be on the same page with respect to where The Bahamas stands on matters of international compliance,” she added

Ms Rolle said consultation between government, regulators and industry remains essential, although she cautioned against relying on all three parties being in the same room for every consultation.

Meanwhile, John Delaney KC, Delaney Partners managing partner, said compliance, while costly, can ultimately serve as a competitive selling point for The Bahamas. “Compliance is necessary,” Mr Delaney said. “Compliance would be a selling point.”

He pointed to The Bahamas’ history of marketing itself after being removed from international blacklists or greylists, and said the country cannot afford to disconnect itself from the international financial system.

“The Bahamas is a tiny nation in the international financial services sense,” Mr Delaney said. “We’re punching above our weight. We’re almost as good as the Golden Girls in that space, and we cannot afford to disengage from the international financial grid, the international financial system.”

Mr Delaney said The Bahamas has long advocated for a level playing field in international financial regulation, including following its blacklisting in 2000.

“Notwithstanding that things might be tough for us, we have to accept that we have to comply, and we have to accept that it can be beneficial for us,” Mr Delaney said. “It makes business go faster, because once you’ve gotten over the cost burden of putting it into place, then you can weed out the bad things that trip you up.”

However, he said regulators must avoid imposing unnecessary compliance burdens through rigid checklists that fail to account for the risk associated with individual businesses.

“There needs to be a checklist for certain minimum status to the extent that it reduces a threshold of priority, but then there needs to be guidelines that one can properly apply a risk-based approach and proportionality,” Mr Delaney said.

They also addressed how accountability should be handled when major corporate failures or cross-border financial scandals occur, with both Mr Halkitis and Ms Rolle cautioning against immediately assigning blame before the underlying causes have been established.

“In times of crisis or any major event, there’s always the impulse to have someone to blame, and perhaps that soothes so much anxiety,” Mr Halkitis said. “And so you know, I think what we do in the event of any sort of event, just to be able to stand back and look and assess before reaction, because you know, those knee-jerk reactions tend to be wrong.”

Ms Rolle said regulators and policymakers should instead examine weaknesses in the regulatory framework, inefficient processes, resource constraints and capacity gaps.

“What we really have to get to is where do we have weaknesses in our framework, where do we have inefficiencies in our processes, where do we have a lack of resources or a lack of capacity, and we need to structure those things,” Ms Rolle said.

She said institutions must be structured to withstand inevitable future crises in a calm and orderly manner, adding that diagnosing systemic weaknesses can take time.