By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is the fourth largest international financial centre by assets, it was disclosed yesterday, with the $595 billion held by this nation’s financial institutions equivalent to 96 times’ gross domestic product (GDP).

The details were contained in the International Monetary Fund’s (IMF) assessment of the Bahamian financial sector’s stability, which largely gave this country a ‘clean bill of health’, while making recommendations for improvements in certain areas.

The report noted that, in terms of assets in the banking sector, only the Cayman Islands, Hong Kong and Singapore were larger in the international financial centre world.

Some 98 per cent of those assets were held by the Bahamian international, or offshore, banks, with this figure being equivalent to 75 per cent of Bahamian GDP.

Referring to the Bahamian commercial banking industry, the IMF report concluded: “There is no obvious near-term threat to bank stability, since banks are very well capitalised (both in terms of quantity and quality of capital), profitable, and are not reliant on wholesale funding.

“High non-performing loan (NPL) ratios remain the key challenge, particularly on mortgages, which account for over half of NPLs.

“Stress tests confirm that the commercial banks can withstand severe shocks to solvency and liquidity, though banks are heterogeneous in their performance. Contagion risks are contained due to extremely limited interlinkages among onshore commercial banks.”

The IMF added that oversight and regulation of the Bahamian financial system had “greatly improved” since the last assessment of the so-called ‘offshore’ segment in 2004, but there was “room” for further advances.

“Banking supervision is strong,” the IMF added. “In the securities area, the new Securities Industry Act has dealt effectively with most of the issues identified in the 2004 assessment, but the current Investment Funds Act 2003 (IFA) and its regulations need to be updated to give the Securities Commission the additional powers required to meet current IOSCO standards.

“Insurance supervision has significantly improved in recent years, but several supervisory and regulatory changes are required to bring regulation in line with international standards.”