By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is “infringing on constitutional rights” and consumer choice by directing new civil service hires to bank with an institution it holds an 82 percent majority stake in, a union chief blasted yesterday.

Kimsley Ferguson, the Bahamas Public Services Union’s (BPSU) president, told Tribune Business that the directive for public service recruits to open accounts with BISX-listed Bank of The Bahamas appeared to contravene freedoms of choice and association while also being anti-competitive from a banking industry perspective.

Hitting out after Gowon Bowe, Fidelity Bank (Bahamas) chief executive, earlier this week revealed that “competition” concerns have arisen over this policy, he voiced concern that it was being driven by the Government who should be setting “a stellar example” to the rest of Bahamian society.

Pia Glover-Rolle, minister of labour and the public service, directed Tribune Business to the Ministry of Finance when approached for comment. She also produced an internal government memorandum, dating from almost nine years ago, which suggested the Bank of The Bahamas policy originated in 2016 soon after the institution had enjoyed its first $100m taxpayer-funded ‘bail out’ rescue over its toxic commercial loans.

Simon Wilson, the then acting-financial secretary, in a March 18, 2016, note titled ‘New banking policy in regard to government new hires’, told all permanent secretaries and department heads “In its mid-year Budget statement, reference was made to the Government’s critical public sector reform plan, which included a move to eliminate all government payments by cheque and adopt a new policy of payments by ‘direct deposit’.

“In this regard, please be advised that with effect from April 1, 2016, all new hires (monthly or weekly) are required to open a bank account with the Bank of The Bahamas to facilitate salary payments. Please note that these persons will not be allowed to change bank accounts in which they are paid until they have become permanent and pensionable.”

No salary deductions were to be allowed until these new hires became permanent civil service employees, and Mr Wilson added: “Finally, the Treasury Department will be issuing a circular on the procedures and required documentation that should be submitted by new hires to facilitate the account opening at the Bank of The Bahamas.”

But Mr Bowe, contacted after Tribune Business obtained the 2016 memorandum, said Fidelity’s teams had been aware for around 18 months that the Bank of The Bahamas “policy” was now being vigorously enforced with new civil service hires informing them “they don’t even have a choice” but to bank with the BISX-listed institution.

Suggesting that the policy outlined in the 2016 memorandum has not been enforced “forcefully” or consistently until recently, the Fidelity Bank (Bahamas) chief replied “it was probably a year ago, and maybe more than that, consistently” when asked by this newspaper when he was made aware of what was occurring.

“It wasn’t as forceful, as deliberate,” he explained. “We were seeing it in pockets in terms of my teams when they got into contact with government employees, and now it’s consistently. They [Fidelity staff] are being told what is being said to them [new civil service hires]. It probably started happening from 18 months ago.

“I think it is a policy choice. I’m not sure the policymakers themselves are in agreement with it... I don’t know if this is a ‘policy’ formally implemented, but it’s certainly a practice that has been very forcefully put into action because we’re getting word saying they don’t even have a choice, and that’s of concern.”

Mr Bowe said he had first heard of the Bank of The Bahamas policy in around 2018, some two years after that memorandum was circulated within the Government, but “then it went silent” until recently. Besides facilitating salary payments, the policy when enacted in 2016 also ensured the BISX-listed institution gained new customers and deposits at a critical time when it was fighting for its financial survival.

The Government, via the Public Treasury and National Insurance Board (NIB), holds a collective 82.6 percent equity ownership in Bank of The Bahamas, which means that in effect it is directing new civil service hires to bank with itself. Mr Ferguson, the BPSU chief, described this as “biased and unfair” both because civil servants are being told “who you are able to associate with” and banking competition is being undermined.

“People have constitutional rights, and Bank of The Bahamas may not be providing the best product in relation to banking for some people,” Mr Ferguson said. “It’s not like the persons were given an option to choose Bank of The Bahamas. It’s more so it was an imperative. I think that’s atrocious.

“Persons should be given the opportunity to choose the banking relationships that they view as being in their best interests. Whatever the situation, it infringes on the constitutional rights of persons to choose who they associate with. They must be allowed to choose the service provider and products they feel are best for them. 

“I am also of the view that this infringes on banking rights in terms of the Government driving consumers to a particular bank instead of having a level playing field. Consumers should be allowed to select the best product for them. It appears that the reforms the Government is making are more beneficial for them rather than the banks and consumers.”

Mr Ferguson said the rationale cited for the policy in the 2016 memorandum, namely the elimination of cheque payment to improve payroll efficiency and the ease of doing business, has fallen away because all Bahamas-based financial institutions are able to facilitate electronic payments.

“I’m very concerned that this type of behaviour is coming from persons in this country who should be a stellar example,” the BPSU chief said of the Government. The practice of directing new civil service hires to open accounts with a certain bank has emerged just as the Davis administration has begun promoting plans to complete and enact antitrust legislation for The Bahamas.

It has repeatedly argued that a lack of competition in certain industries - which it has yet to identify - has contributed to high prices, inflation and the country’s cost of living woes. However, Mr Bowe told this newspaper earlier this week that, as the largest employer in The Bahamas, the Government “has an obligation to promote competition” and consumer/personal choice as well as ensuring efficiency with its payment systems.

“They are encouraging new employees to bank with a particular bank so, for other banks, they are unable to obtain salary deductions and those people are unable to initially bank with their chosen bank,” Mr Bowe said then.

“That’s going to put restrictions on growth coming from new employees in the Government sector. That’s a policy government needs to consider as competition. It has a role as an employer, and can make decisions on payment efficiency and effectiveness, but as the largest employer in the country it has an obligation to promote competition.

“When it makes an internal decision as to who employees bank with or borrow from, that’s not competitive behaviour but is probably unintentional because it’s not considering engaging ownership participation and capital markets participation.” The Ministry of Finance could not be reached for comment before press time last night.