Even having all but lost its private international banking business, The Bahamas has not seen the nadir of financial services sector losses, and the jurisdiction needs to find another services-related niche to fill. That was the verdict, delivered with his characteristic bluntness, by former Prime Minister Hubert Ingraham. Added to that, he said the proliferation of as-yet unregulated web shop gaming houses will cause The Bahamas "untold damage".
Ingraham addressed the matter in the context of comments about the financial services sector, particularly a discussion of de-risking, which refers to financial institutions exiting relationships with and closing the accounts of clients considered "high risk". The phenomenon has led to the loss of correspondent banking relationships in The Bahamas.

De-risking
Ingraham pointed to traditional correspondent banking services like wire transfers
and the ability to conduct business transactions, accept deposits and gather documents on behalf of another financial institution. He predicted such relationships would dwindle in number.
"The number of banks in The Bahamas that will be authorized to conduct such transactions is going to be reduced, and reduced, and reduced, until probably you're going to end up with the big banks - CIBC FirstCaribbean, Scotiabank and Royal Bank of Canada -- [able to do so] and people like Bank of The Bahamas and them will be doing domestic banking... but nothing overseas. That's what de-risking is going to do," he said.
He pointed to Belize, which now has a single bank capable of conducting the transactions prohibited to institutions on the wrong side of de-risking.
"All to do with this money-laundering issue.
"And, the unregulated number business in The Bahamas is going to cause this country untold damage. Untold damage," he insisted.
The former prime minister explained why -- despite the passage of the Gaming Act and Gaming Regulations -- he deemed the business unregulated.
"Who is able to determine what money goes into this pot? Who is able to determine where all this large sum of money is coming from? There's always been an issue with money laundering in the world. It's a big issue in the world. Big issue right next door in America.
"It's regulated? Do they have permanent licenses? It's a problem. It's a big problem."
In fact, the web shop gaming operators do not yet have licenses. They have been given provisional licenses during what the Christie administration continues to call a transition period, but the work to effect that transition appears to have slowed. For instance, the completion of the much-ballyhooed zoning regulations have yet to be promulgated, and in the meantime, new web shop locations continue to sprout around the country on an almost daily basis.

Private banking
On the subject of financial services generally, Ingraham said he was hopeful The Bahamas would find another niche in terms of services.
"We have lost international private banking. What hasn't left yet will leave. So the full downsizing of that sector has not yet taken place. That's a reality. We wish it was otherwise, but it ain't gonna be otherwise. The developed world is determined to squeeze small places like The Bahamas where they claim their tax dollars are hidden, and we need to find something else," he said.
Have we seen the worst of it in financial services?
"No, we have not. It's just a matter of time."
While skilled and qualified Bahamians would likely be able to find private banking employment elsewhere, Ingraham said, "in terms of The Bahamas as a domicile, they are putting us out of business."
"That's regrettable, but they are putting us out of business.
"When in 2000, we were blacklisted and we took all the steps we did, we postponed it. We bought some time. I was criticized most heavily... [I was] buying time. Looking the inevitable in the face and saying I will buy another five years, buy another 10 years, but knowing full well that I cannot buy in perpetuity. It's going to end, and they are squeezing it more and more now."

Diversification
Ingraham has long been a diversification skeptic, and remains so.
"It's easier said than done," he said. "People say that all the time. Diversify into what?
"Freeport, Grand Bahama, has probably the most diversified economy of any part of The Bahamas: they have the container port, they have the ship repair facility, they have a number of industrial undertakings. That doesn't mean we can pick that up and put that in Eleuthera, or do the same thing here in Nassau. We are essentially a service-based economy. That's what we have, and when the economy is bad in America, we are going to feel it."
Ingraham noted reports that wages paid in America today are the same as they were 10 years ago.
"Well, the cost of living is higher, so that means people have fewer dollars for disposable income, for vacations. That's why they want bargains. Here in The Bahamas we have fewer hotel rooms in operation today than we had 10 or 15 years ago.
"When Kerzner and those did the development on Paradise Island, we didn't get a net increase in hotel rooms, you know. We got better rooms. There used to be a hotel down at South Ocean. It's gone. So we don't have the opportunities for more and more people to work," he said.

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