Bank Supervision

The Bank Supervision Department

Bank Supervision's underlying philosophy revolves around the concept that banks and trust companies should be free to allocate credit according to market forces and should be entitled to set terms and conditions for their operations in an environment of competition. However, strict supervisory rules should be set for bank behaviour in order to protect depositors and other creditors and the financial system as a whole. Pursuant to this, the objective of bank supervision in The Bahamas is to promote and maintain the safety, soundness, and integrity of the Bahamian banking and financial system and of each institution within the system; while promoting confidence in the financial system through the implementation of policies and standards that are in keeping with international best practices for supervision and regulation.

The Bank Supervision Department spearheads the licensing and supervisory functions of the Central Bank. Since the enactment of policy revisions in 2000, one of the Department's primary focuses has been on strengthening this new regulatory framework. This process has involved ongoing consultations with the industry and other interested public parties; and has led to the development and adoption of new supervisory regulations and prudential guidelines, along with revisions to existing ones. Moreover, the strengthening of domestic and international cooperative mechanisms continue to be a high priority.

The work of the Department is co-ordinated over three units: the Supervision Unit, Policy Unit and the Administration and Operations Unit. The Supervision Unit is responsible for all aspects of the onsite and offsite examinations relative to legal and regulatory compliance including, governance structures and prudential indicators. Almost two thirds of the Department's staff is dedicated to these activities. The latest thrust of supervisory activities included the programme to discontinue "managed" banking institutions, or "shell" banks.

Established in 2002, the Policy Unit is charged with the research, development and implementation of supervisory policies which are consistent with international best practices, and which effectively address the supervisory issues of the Bahamian banking and trust industry. Supervisory policies and guidelines are developed in a consultative framework, where industry participants and the wider public are allowed to comment on policy documents before they are finalised. Among the initiatives in the Unit's work programme, is industry preparation for the eventual adoption of the new capital framework (Basel II).

The primary functions of the Administration and Operations Unit are to provide back office support for supervisory activities, with direct responsibility for ensuring that licensees satisfy reporting requirements; to maintain databases of information relating to licensees; and to monitor and analyse balance sheets in order to assess capital adequacy and liquidity trends of licensees. The Unit also coordinates the human resources and training needs of the Department and provides administrative support for the operations of the Deposit Insurance Corporation and the Agricultural Credit Guarantee Fund.

Bank Supervision