The Central Bank of The Bahamas (CBOB) Financial Stability Report for December 2016 heralds a positive outlook for a large part of the financial services sector, given positive stress test results.
In October 2016, CBOB facilitated the private sector's access to financing. This was increased on a wider scale in December 2016, which aided not only companies and individuals but domestic banks as well, due to the increase in fee-based income.
Credit unions and other non-bank financial service providers also had positive performances in 2016. This was largely due to reductions in operating expenses and slight increases in "miscellaneous" income.
"Risks to financial stability remained contained during 2016, reflecting mainly strong capital levels in the various sectors, a mild overall improvement in asset quality indicators and an incrementally firming macroeconomic outlook," the bank stated.
"Over the medium term, continued emphasis will be placed on strengthening the financial sector's resilience. This includes the sustained adoption of the best international standards for effective prudential oversight.
"Further enhancements to the effectiveness of anti-money laundering/countering the financing of terrorism systems are also being stressed, given the prominence of this issue for at-risk correspondent banking relationships. This also underscores the ongoing collaboration that must be sustained among domestic and regional regulators on such matters.
"The Central Bank is also improving macro-prudential oversight mechanisms, to ensure timely responses when heightened stability risks emerge."
CBOB explained that, despite improvements in commercial banks' asset quality indicators, the banks continued to be conservative in their loan approvals.
"Stress-testing results, for the simulated possible deterioration in credit, deposit and other exposures, meanwhile, continued to underscore healthy levels of capital and liquidity for banks, relative to international benchmarks," CBOB's report stated.
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