By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry has received a major vote of confidence from Standard & Poor’s (S&P), which believes this country will not be ‘blacklisted’ or ‘greylisted’ as a result of the ‘Panama Papers’ leak.

The rating agency, in maintaining the Bahamas’ current ‘investment grade’ status, said its decision was at least partly influenced by the expectation that there will be no major international ramifications from the leak of 11.5 million documents from the Mossack Fonseca law firm.

The Bahamas was named as the third most-popular jurisdiction for Mossack Fonseca’s company incorporations, behind Panama and the British Virgin Islands, and its name has been mentioned in connection with corporate entities linked to Argentina’s president and the father of UK prime minister, David Cameron.

The Government, and private sector, have taken a ‘wait and see’ approach in assessing the ‘Panama Papers’ fall-out, and how the Bahamas should respond, but S&P’s comments provide the first international support for this jurisdiction.

“Despite the recent leaks of offshore bank accounts in the Bahamas by Panamanian law firm, Mossack Fonseca, along with accounts in other offshore financial centres, our ratings affirmation is premised on our belief that these leaks won’t result in the country falling back on the Organisation for Economic Co-operation and Development’s ‘grey list’ for financial centres operating as tax havens,” S&P said.

“The country was removed from the ‘grey list’ in 2010. The affirmation also assumes that these leaks won’t affect the banking sector’s ability to roll over its debt.”

K P Turnquest, the Opposition’s deputy leader and finance spokesman, welcomed S&P’s assessment as “consistent” with his own when it came to determining the likely impact of the ‘Panama Papers’ saga on the Bahamas and international financial centres (IFCs).

“That’s good news, and is consistent with what we have so far,” he told Tribune Business of the rating agency’s analysis.

“It all appears to be circumstantial, and it appears we just happen to be a jurisdiction where some accounts were held. Certainly, there’s no indication of wrong doing or lack of compliance among Bahamian institutions at this point.”

It is unclear, though, whether the Bahamas is completely ‘out of the woods’ in relation to the global reaction to the ‘Panama Papers’, especially given the pressures on major industrialised nations from the media and voters to act.

Tax authorities in Europe and elsewhere have been meeting to co-ordinate their response, and the European Union (EU) has already threatened new ‘blacklists’ of IFCs. Further global regulatory initiatives targeting the Bahamas and others appear likely.

Meanwhile, S&P said Bank of the Bahamas’ woes did not represent a systemic risk to the domestic commercial banking industry, as it chided the Government-owned institution for not providing for bad loans more rapidly.

“In terms of the Bahamian banking system as a whole, the system remains well-capitalised, with the latest data showing that aggregate capitalisation ratios reach almost 29 per cent,” S&P said in its April 15 analysis.

“Nevertheless, the Government had to bail out a government-owned bank, Bank of the Bahamas..... While the bank’s problems have not been solved over the long term, we don’t believe that these problems are representative of widespread under-provisioning in the Bahamian banking system, given that other banks have been more proactive in provisioning or have less risky, more diversified portfolios.”

Tribune Business reported yesterday how Bank of the Bahamas needs to increase its capital base by $30 million to meet global regulatory requirements, with its Board now assessing “various options” to achieve this.

Renee Davis, the BISX-listed institution’s newly-appointed managing director, told its annual general meeting (AGM) that it was currently non-compliant with the minimum regulatory capital levels demanded by the Basle III reforms dealing with worldwide banking industry regulation.

Bank of the Bahamas is now planning to hold an Extraordinary General Meeting (EGM) within the next 90 days to elect two minority shareholder representatives to its Board of Directors.

Bank of the Bahamas’ minority shareholders, who collectively hold 35 per cent of the BISX-listed institution’s equity, can now nominate candidates to represent their interests for election to the Board of Directors.

Bank executives promised that the Government, which owns more than 51 per cent of voting rights via the Treasury and National Insurance Board (NIB), will not participate in the selection “to ensure fairness and transparency”.