By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Central Bank last night unveiled multiple reforms to further relax The Bahamas’ exchange control regime that it believes will not create any “material” risks for the US dollar peg and wider economy.

The banking regulator, in a statement, said the easing will remove the need to obtain the Central Bank’s prior approval for a variety of current and capital (investment) account transactions and thus provide residents, businesses and work permit holders with a more efficient process involving reduced time and costs.

Asserting that the latest liberalisation is in keeping with the “sustainable and manageable” pace needed to safeguard the Bahamian dollar’s one: one fixed exchange rate peg with its US counterpart, the Central Bank said commercial banks and money transmission businesses will have freedom to approve more regular payment transactions.

Highlighting at least ten types of current transaction it believes will be positively impacted, the regulator said the value of gifts that can be sent to non-residents, churches and charitable organisations without requiring Central Bank approval is being increased from $15,000 to $100,000.

The threshold at which group/business travel requires Central Bank exchange control approval is being raised by the same amount, from $15,000 to $100,000, while commercial banks and money transmission firms can approve foreign payments for car rentals and hotels booked through local travel agencies up to the amount stipulated on the bill.

And temporary residents, or work permit holders, will be able to obtain a Bahamian dollar credit card without Central Bank approval. All these reforms, which impact current account transactions, will come into effect in ten days’ time on April 1, 2024.

As for the capital, or investment, account reforms, the Central Bank said they will be implemented on June 1, 2024. With effect from that date, individuals will be able to convert up to $100,000 for overseas investment purposes, such as acquiring securities or real estate, without obtaining the regulator’s prior approval. This authority has now been delegated to an “authorised dealer”, namely a commercial bank.

And foreign currency purchases of non-residential and mixed-use Bahamian real estate by overseas nationals “may conclude without reference to the Central Bank”, although development and multi-residential projects - as well as those involving Bahamian dollar financing - will still need its approval.

“The relaxation covers a range of current and capital account items, including the easing of rules for non-resident real estate transactions; easier access of residents to foreign currency financing from overseas; and more streamlined approvals of payments for gifts to non-residents, insurance remittances, travel and franchise royalties,” the Central Bank said.

“The Central Bank is also introducing a more simplified process for locals wishing to invest overseas via the Investment Currency Market (ICM), which would take effect on June 1, 2024, in order to establish the additional administrative and reporting mechanisms that are needed for authorised dealers (commercial banks).”

Confirming that these moves are being undertaken after consultation with the Ministry of Finance, the Central Bank added: “The reform measures represent yet another phased liberalisation, balancing the objectives of improved administrative processes and deepened capital market access against pre-served sustainability of the Bahamian dollar fixed exchange rate......

“The Central Bank has carefully evaluated the balance of payments risks involved with the proposed reforms. The impact [to] net foreign exchange outflows is not expected to increase to any material degree for the Bahamian economy.

“Additionally, through the reporting requirements in place for commercial banks, the Central Bank is able to monitor relevant transactions statistically to inform any policy adjustments that might be needed from time to time,” the regulator continued.

“For the remainder of 2024 and 2025, the Central Bank will continue to focus on the following: Deeper stakeholder engagement on capital account liberalisation and capital flow management policies; more visible and better promotion of the quality of the regulatory regime impact- ing commercial bank delegated responsibilities; and strengthened public relations capacity in the policy and technical work streams inside the Central Bank relating to the accumulated policies on exchange control.”

Other current account transactions impacted by the elimination of prior Central Bank approval requirements include the payment of insurance premiums to non-resident beneficiaries; pension payments of up to $1m to non-residents; franchise royalty payments; and child support and alimony payments up to a $100,000 threshold regardless of whether they have been ordered by a court or not.

As for the ability of work permit holders to obtain Bahamian dollar credit cards, the Central Bank said: “Some banks may not be clear on this, but this is the case now. If an individual or company qualifies for a Bahamian dollar loan, they may obtain a Bahamian dollar credit card without reference to the Central Bank.

“This includes companies designated resident that have some level of Bahamian ownership, temporary residents and economic residents. The purposes and maximum limits would still be governed by existing rules/policy.”

This would involve not using a Bahamian dollar credit card for capital transactions without prior approval of the Central Bank. They could also not be used for property purchases other than owner- occupied homes with a cap of $400,000.

“Over the years, the Central Bank, in consultation with the minister of finance, has gradually increased the delegated authority of commercial banks to approve payments for various categories of current account transactions; gradually increased the access of Bahamians to both inward and outward facing investment transactions; and liberalised the ease with which non-residents (particularly foreign investors) transact with the domestic economy,” the Central Bank said last night.

“Liberalisation measures continue to be paced against outcomes that are sustainable and manage- able, given the overriding importance of maintaining adequate foreign reserves to safeguard the Bahamian dollar fixed exchange rate. On the whole, the 2024 measures are expected to result in improved efficiencies for both residents and temporary residents (work permit holders).

“For residents, the measures further reduce the requirement for prior approvals from the Central Bank for a range of payments on transactions on both the current account (trade-related payments and transfers) and the capital and financial account (investments),” the regulator added.

“For temporary residents, added ease is provided in obtaining certain local currency products and services provided by commercial banks. For non-residents, residential real estate transactions will be further distanced from exchange control vetting.”

John Rolle, the Central Bank’s governor, foreshadowed further liberalisation and easing of the administrative functions surrounding The Bahamas’ foreign exchange regime at his January media briefing. He said the focus would be placed on “defining limits” for how much overseas currency individuals can access via commercial banks without having to obtain the Central Bank’s approval first.

“The Central Bank is also taking a very cautious and measured approach to further liberalisation of exchange control measures. After the forthcoming consultation with the Government, we anticipate a further shift in delegated responsibility for investment currency market transactions to commercial banks, and some increased delegation for commercial banks to approve other foreign exchange transactions,” the Governor explained.

Responding to further Tribune Business questions on the issue, Mr Rolle added: “The emphasis is on shifting the system even more in the direction of individuals being able to go directly to commercial banks to complete transactions without getting initial approval from the Central Bank.

“We are going to look at how we can define limits even for investment currency that the commercial banks can facilitate for individuals, and there are certain categories of non- investment transactions - what we typically refer to as current account transactions - where there’s room to allow commercial banks to operate with higher approval limits.

“Again, the intention there would be there’s less need for individuals to come to the Central Bank for prior approvals.”