By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor says it will recommend reforming the Payments System Act to aid development of the so-called ‘basic bank account’ designed to boost financial access for many Bahamians.

John Rolle, in a series of written answers to Tribune Business questions, added that development of the Financial Services Ombudsman’s office has also spearheaded efforts to develop “financial protection legislation” for Bahamian consumers.

Signalling that enhanced consumer safeguards and increased Bahamian access to banking services remain a priority for the regulator, he said: “The Central Bank continues to explore a range of consumer financial protection-related initiatives, including strengthening financial literacy programmes that empower users to better navigate the services provided by financial institutions.

“While the Central Bank’s 2024 directive focused on improving transparency in fee setting, the Central Bank also intends to have a public consultation later this year on a basic transactions account to support better access to banking services. The Central Bank will recommend changes to the Payments System Act to enable this and any other related financial inclusion measures.

“The Office of the Financial Services Ombudsman (OFSO) has allowed the Central Bank to have more direct access to mediate complaints raised against banks and payment services providers. The OFSO also provides targeted education that has helped resolve misunderstandings in many cases.

“Beyond this, the Ombudsman’s office is leading work to develop consumer financial protection legislation for The Bahamas, with scope that could extend beyond deposit and credit products.” Elsewhere, Mr Rolle said lending by Bahamian commercial banks is expected to increase again in 2025 after more than doubling year-over-year in 2024, which is forecast to help reduce the sector’s $3bn in excess liquidity.

“We have begun to see growth in private sector credit which should absorb some of the excess liquidity. This process of reducing the overhang of liquidity, once sustained, will have impacts over several years. Over the medium-term, the Central Bank also believes that other interventions will be need to reduce liquidity,” the Governor confirmed.

“One of these is having the banks pay out larger amounts in dividends to remove some of the surplus resources from the system. Some inroads to reduce liquidity will also depend on the expected progress with fiscal consolidation. This is expected to give the Central Bank more room to sell off more of its own holdings of government debt to the financial institutions, which would remove additional liquidity from the system.

“In 2024, total credit growth was more than double the 2023 amount. The flows to the private sector were broadly for consumer credit, mortgages and commercial lending. These trends are expected to further strengthen in 2025, as the economic outlook remains broadly positive,” Mr Rolle added.

“Two other important, uplifting factors, are that loan delinquency rates or credit risks continue to subside, and the credit bureau is helping lenders to sort out potential new risks. The Central Bank expects the Government to be able maintain its access to the domestic credit markets.

“The Central Bank has worked closely with Ministry of Finance to strengthen investor relations, allowing the ministry meet at least quarterly with domestic institutions to discuss market trends and fiscal developments. This is improving the transparency of the process.”

While giving full support to the likes of the Bahamas Financial Services Board (BFSB) and others in their efforts to grow and promote the Bahamian financial services industry, Mr Rolle said: “We believe that the competency of the regulator matters to the success of our jurisdiction, alongside keeping The Bahamas’ legal system up to date with international norms.

“In this regard, the priority through the supervisory process is to ensure that The Bahamas is both effective and compliant in its international obligations on tax transparency and financial integrity. In so far as product innovations are concerned, the Central Bank is very receptive to viable ideas from industry, finding ways to ensure that these can be efficiently adopted while keeping the banking sector both on a sound prudential footing and consistently effective in how it manages financial crimes risks.

“Based on the industry’s feedback, we have to persist across the Group of Financial Services Regulators to minimise the duplication of compliance efforts that some entities face, and to achieve even greater harmonisation of our standards and guidelines, which feed into the cost of doing business.”

As for driving greater use of the Bahamian digital currency, the Sand Dollar, the Governor added: “The Central Bank’s Sand Dollar adoption unit is focussed on expanding the use of Sand Dollars throughout the archipelago and strengthening financial inclusion.

“Some of the targets include increasing the percentage of the market using Sand Dollars for transactions, and broadening the acceptance of Sand Dollars at businesses nationwide. The strategy for increased adoption includes more widely enabling Government-to-People (G2P) and Business-to-People (B2P) payments, which will put individuals more directly in the reach of non-cash payments.

“The work to integrate the Sand Dollar platform into the Automated Clearing House (ACH) positions the Central Bank to make this push. We have seen a few businesses beginning to pay persons directly to their digital wallets over the ACH just as easy as they send funds to employees with bank accounts,” he said. 

“The Central Bank is also targeting increased involvement of commercial banks, emphasising the importance of them accelerating efforts to provide their customers with digital wallet apps.”