By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank has unveiled plans to lift the suspension on dividend repatriations by the Canadian-owned commercial banks in March 2021 due to "lessening uncertainty" surrounding COVID-19.

John Rolle, the regulator's governor, told Tribune Business there was now "more clarity" as to when The Bahamas' all-important foreign currency inflows will start to improve due to the emergence of vaccines for the pandemic-causing virus.

Implying that this had given the Central Bank confidence to lift the dividend repatriation suspension that was imposed in March/April 2020 to help protect the external reserves that support The Bahamas one:one US dollar peg, Mr Rolle nevertheless conceded that foreign currency inflows "will continue to be strained in 2021" as tourism slowly rebounds.

However, with dividend payments by the likes of Royal Bank of Canada (RBC), CIBC FirstCaribbean International Bank (Bahamas) and Scotiabank (Bahamas) likely to be spread out via a phased approach, Mr Rolle said there would be no sudden depletion of the external reserves.

He added that the impact of the suspension's end will more likely be felt towards the end of 2021, "and with greater force" in 2022.

The policy change was revealed in the year-end letter sent to the regulator's licensees by Charles Littrell, the Central Bank's inspector of bank and trust companies, who told the industry: "In March 2021, the Central Bank will resume exchange control consideration of applications for dividend repatriation by commercial banks.

"This will lift the suspension that was imposed at the onset of the pandemic-related slowdown in foreign exchange inflows, in March and April 2020. For dividends approved prior to March 2020, commercial banks will be required to update their repatriation schedules and obtain amended exchange control approvals.

"Otherwise, the prudential assessments mentioned above will continue to affect dividend approvals. This policy shift, nevertheless, anticipates continued multi-year schedules for dividend remittances and lessening uncertainty about when private sector foreign exchange inflows are expected to begin to recover."

Tribune Business recently reported that BISX-listed CIBC FirstCaribbean was awaiting Central Bank approval to pay a total of $93.773m in dividends declared by its Board, of which some $89.281m is due to be upstreamed to its Barbados-based regional parent. These payments to shareholders have all been held up the Central Bank's repatriation suspension.

Thus the policy shift is a New Year's gift for the regional and global parents of the Canadian-owned banks. Explaining the rationale for the March 2021 move, Mr Rolle told Tribune Business: "That's not a statement of the level of recovery [in the economy and foreign reserves]. That's more a statement of the improving clarity in the outlook.

"We as a regulator have other tools upon which to rely upon to manage banks' dividend policies. It's related to the prudential tools that look at the health of the institution one-to-one."

In a subsequent e-mail, Mr Rolle added: "We must clarify that foreign exchange markets will continue to be strained in 2021. But there is more clarity around when inflows will start to pick-up. There was no way to form such expectations in the absence of approved COVID19 vaccines or the understanding we now have about when the foreign reserves could bottom out.

"Dividend approvals for commercial banks allow the repatriation to be spread over multiple transactions, even over several years. That approach is maintained. Therefore the impact of this policy change will begin to be felt more in the latter part of 2021, and with greater force in 2022.

"Dividend approvals will still reflect all other regulatory considerations around the financial health of banks, including risks that vary from entity to entity in the current environment. The Central Bank also retains the flexibility to manage the timing of outflows, according to schedules that are approved for each entity."

Mr Rolle had earlier this year suggested that the bar on dividend/profit repatriation by the Canadian-owned banks, coupled with the block on foreign portfolio investments by Bahamians, was likely to conserve up to $180m of foreign currency reserves for The Bahamas. This was part of a wider strategy targeting some $300m in savings.

Elsewhere, Mr Littrell's letter disclosed that the Central Bank is pushing the domestic commercial banks for greater transparency surrounding how they select "approved attorneys" for conducting legal work related to mortgage transactions.

"Domestic commercial banks are reminded of the directive issued in the letter dated December 21, 2020, to disclose to the Central Bank their practices around attorney selection in line with the requirement of Section 16(2) of the Homeowners Protection Act 2017," he wrote.

"Commercial banks are further directed to transition by February 28, 2021, to publish their selection criteria for the general public to have access." And Mr Littrell also voiced disapproval that one Bahamas-based bank and trust company had raised new equity capital from its existing shareholders without seeking the Central Bank's prior permission.

"In the current quarter we have seen one SFI (supervised financial institution) raise new equity from existing shareholders, but without first seeking the Central Bank’s approval," he wrote. "SFIs are reminded that such transactions require prior approval from the Central Bank, and penalties can apply when such approval is not secured in advance.

"Our policy is that capital increases that do not change the shareholder group should be approved routinely and quickly. Capital changes that involve new or departing material shareholders will require approval of the shareholder movements, as well as the capital movements.

"As always, capital reductions require prior approval. SFIs reducing capital other than by approved dividends without prior approval should expect a substantial supervisory response from the Central Bank."