Tuesday, February 4, 2020
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A major Swiss-owned financial institution yesterday revealed the closure of its Bahamas business with the loss of 30 jobs in the latest blow for the financial services industry.
Julius Baer said the decision to close its Nassau "booking centre" was part of a strategy designed to slash its global cost base by 200 million Swiss francs, adding that The Bahamas terminations would be "staggered" during an orderly wind down with all staff receiving due severance pay and benefits.
Peter Wirth, Julius Baer Bank (Bahamas) principal, did not return Tribune Business messages seeking comment, but a spokesperson said: "It's about 30 employees that will be impacted. Julius Baer will conduct a professional liquidation process. This will take time, so the job cuts will be staggered. The affected employees will receive severance packages."
In subsequent replies to Tribune Business questions, Julius Baer made it clear that the decision to exit The Bahamas was driven largely by its own "commercial" strategy and view of its "future growth potential" in this nation.
"Julius Baer will no longer have a presence in The Bahamas once the liquidation process has been finalised," the institution confirmed. "The decision to close our office in The Bahamas is a purely commercial decision based on future growth potential.
"The closure is part of a global efficiency programme which the group has announced today. This is a purely commercial decision. The group is reviewing its global footprint based on future growth potential."
Julius Baer's updated global strategy report, released yesterday, said The Bahamas exit was part of a wider cost-cutting drive. International media reports said up to 300 jobs group-wide may be shed, meaning this nation would account for 10 percent of the total.
"Julius Baer will reduce its cost base by 200 million Swiss francs through productivity and efficiency measures," the report added. "These measures will include simplifying its organisation, improving operational excellence in all areas, and reviewing the Group’s geographic footprint based on future growth potential. It has already been decided that the booking centre in The Bahamas will close."
Bahamian employees, based at its Ocean Centre headquarters at Montague on East Bay Street, were informed of the Swiss-headquartered institution's decision for the first time yesterday.
"After the long-standing commitment to The Bahamas, Julius Baer has not taken this decision lightly and regrets the impact of this group-wide programme on local staff and clients," the bank said.
"All the necessary steps for this process are being taken in close alignment with the relevant authorities. The booking centre will remain operative for an appropriate period of time in order to allow for an orderly dissolution of the business. The group is committed to offer all affected clients a suitable alternative."
Julius Baer added that it would assist its Bahamas-based staff through the wind down, "and continues to rely on their professionalism and support". It added that the closure was designed "to address margin pressure and structurally lower the group's cost base by 2022, as its bids to simplify its organisational structure and "streamline" the front office".
News of Julius Baer's impending closure stunned many in the financial services industry. One executive messaged Tribune Business: "Trying to see if they are completely closing down their trust company, too. We had several senior trust officers who went there so we're all very concerned."
Elsworth Johnson, minister of financial services, trade and industry and Immigration, declined to comment on the implications of Julius Baer's exit as he had just returned to The Bahamas and was unaware of what had happened.
However, the loss of such a major name in Swiss and global wealth management represents another hit for The Bahamas together with the loss of more high-paying jobs from a sector that has played a key role in developing this nation's middle class.
The Julius Baer decision is a further sign of how global consolidation continues to impact the Bahamian financial services industry as institutions reduce their footprint to operate only from nations where they can achieve the desired returns. "It's bad news. Those are high-paying jobs," one source, speaking on condition of anonymity, said.
Craig A. 'Tony' Gomez, Baker Tilly Gomez's managing partner, yesterday told Tribune Business that "the message it sends" was likely to be more important for the wider Bahamian financial services industry than the loss of jobs.
He added that the arrival of new institutions tended to signal a jurisdiction was strong, and doing well, while their departure was often interpreted as a sign of weakness. "It's a bit unfortunate," Mr Gomez said of Julius Baer 's move, "but it could merely be a shift in strategy, which is commonplace these days.
"We have to examine ourselves, and The Bahamas is still a well-regulated, well-run jurisdiction. We're not seeing anything different from other jurisdictions. The story of today has changed from that of yesterday, and every financial institution is evaluating where they must move to.
"It's not only happening with financial institutions, it's happening with Google, Amazon and Facebook. It's all the major players. But for an island nation like ourselves, where the financial community is the second largest part of the economy, we're hopeful the minuses don't outweigh the pluses."
The Bahamian financial services industry has struggled to grow, and effectively been in a state of slow decline, following the 2000 "blacklisting". It has been kept off-balance by a constant stream of tax, anti-money laundering and counter-terror financing initiatives from the likes of the European Union (EU) and Organisation for Economic Co-Operation and Development.
Financial services industry sources had last week predicted that 30 lay-offs were coming in the sector, but suggested they were likely to fall at another institution - Private Investment Bank - not Julius Baer. It is unclear whether they named the wrong institution, or if something similar has - or will - occur at that other bank. There was no confirmation of this before press time last night.
Comments
Well_mudda_take_sic says...
The Minnis factor at work!
Posted 4 February 2020, 9:22 a.m. Suggest removal
banker says...
LOL. This de-risking process has been going on for the past 15 years or more.
Posted 4 February 2020, 11:52 a.m. Suggest removal
Dawes says...
Not really the Minnis factor, its successive Governments at work as well as the black listing. WE have known for years that the financial industry was in decline and needed a major reboot. Unfortunately all we did was talk about what needed to be done and then never did anything. Until the major change happens it will decline. Seeing as one of those major changes would be the opening up of the work permit system to make it easier and more efficient to obtain, and this is highly unlikely to happen i would expect the continued slow decline of this industry. But thats OK as it only provided many Bahamians with a way of entering the middle class or being able to get employment overseas and thereby getting out of here.
Posted 4 February 2020, 9:32 a.m. Suggest removal
Well_mudda_take_sic says...
You're right. I should have been more specific and said: The Minnis-Sebas Bastian factor at work!
Posted 4 February 2020, 10:07 a.m. Suggest removal
Proguing says...
This has nothing to do with Minnis or the FNM. It is the result of a loss of competitivity of the Bahamas with the exchange of information imposed on this nation by Obama and the Europeans, whilst the US did nothing of the sort.
Another factor is the overregulation of the financial sector, which is making it almost impossible for banks to continue operating in this jurisdiction. The typical example is the ease to open an account in the US vs the Bahamas.
Yesterday it was also announced that Syz Bank would cease operations in the Bahamas. So that’s two Swiss banks pulling out in one day, and the Tribune mentions a potential 3rd one!
Posted 4 February 2020, 10:37 a.m. Suggest removal
lucaya says...
"This has nothing to do with Minnis or the FNM. It is the result of a loss of competitivity of the Bahamas with the exchange of information imposed on this nation by Obama and the Europeans, whilst the US did nothing of the sort." The truth of the matter!
Posted 5 February 2020, 4:06 p.m. Suggest removal
One says...
The financial sector has little impact to the Bahamian economy. You have financial institutions managing billions of dollars but it stays within the organisation while inflating our economy. If the country taxed these institutions they would leave. The only thing that makes the Bahamas attractive to them is the fact that they can keep more money to themselves.
This company's entire staff for Bahamas operations is 30. That's 30 jobs for managing billions of dollars. That's not that many jobs relative to the value of the business. Also how many of those 30 jobs are Bahamians?
Posted 4 February 2020, 10:53 a.m. Suggest removal
Dawes says...
Yup it only accounts for 10-15% of our GDP, and employs some 3,862 Bahamians and 267 foreigners (though about 2,500 Bahamains were in local banking, so 1,362 in offshore). Banks also spent $710 million of which almost $325 million was salaries. But yeah not that important. Note these are all from 2017 https://www.centralbankbahamas.com/down…
Posted 4 February 2020, 12:37 p.m. Suggest removal
One says...
You are missing the point and your numbers are presented in a misleading manner.
I recommend giving this a read:
https://www.theatlantic.com/business/ar…
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable... For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure...
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
Posted 4 February 2020, 1:02 p.m. Suggest removal
Dawes says...
Then it is the fault of the Government not the industry. This is the same as the oil curse, and yet some countries have benefited from it (Norway) whilst others haven't. I am fairly sure we have these issues with Atlantis and BahaMar having undo influence. Would you therefore say we should close down our tourism industry? It's easy to blame the industry when in reality the problems from it will be due to the Government that is meant to regulate it.
Posted 4 February 2020, 1:31 p.m. Suggest removal
One says...
I agree but if the Government regulates the business leaves and the people panic. We seem to be stuck on tertiary industry. Our economy is too dependent on a couple industries. We must develop primary industry otherwise we won't be able to build a larger middle class.
Posted 4 February 2020, 2:04 p.m. Suggest removal
Proguing says...
This has nothing to do with Minnis or the FNM. It is the result of a loss of competitivity with the exchange of information imposed on this nation by Obama and the Europeans, whilst the US did nothing of the sort.
Another factor is the overregulation of the financial sector, which is making it almost impossible for banks to continue operating in this jurisdiction. The typical example is the ease to open an account in the US vs the Bahamas.
Yesterday it was also announced that Syz Bank would cease operations in the Bahamas. So that’s two Swiss banks pulling out in one day!
Posted 4 February 2020, 11:56 a.m. Suggest removal
bogart says...
Financial services sector has been long ago known to be withering away last years sheddinh over 600 jobs and some 200billion out of this jurisdiction. Technology evolved to shed employees, online, atms, one call centre, eliminating paper incl paper money, brick and mortar structures. Other countries have been shaken up like jobs fleeing back to Europe, Hongkong clients fleeing, Cayman in earthquake etc.
The Bahamas like all Caribbean nations, Bermuda, every single island rock, shoal Cay going under water flooding stronger Hurricanes.
Bahamas has to revamp looking to future vehicles, mechanisms, means to cater to Changed and changing market, clients and stop flogging dead horse gloating on past history.
Posted 4 February 2020, 12:33 p.m. Suggest removal
sealice says...
shift in strategy to move TF away because there is no "ease of doing business" in the Bahamas anymore.... this company got it's own license to print francs and they don't feel the need to waste them anymore here it's just not worth it.... it probably got a lot smaller too....
Posted 4 February 2020, 12:43 p.m. Suggest removal
ThisIsOurs says...
"*News of Julius Baer's impending closure stunned many in the financial services industry*"
why is anyone surprised? That's the most shocking part of the story. I'm surprised there are any left. Behind closed doors Im betting that the remaining banks all have their plans in place, ready to exit the country. Time to start thinking strategically. Time to start investing in Bahamians
Posted 4 February 2020, 3:01 p.m. Suggest removal
TalRussell says...
Upon reading story's headline - thought was talking about job loss an Orange Julius stall?
Posted 4 February 2020, 4:59 p.m. Suggest removal
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