Chronology

Chronology of Monetary Policy & Related Developments

• May 2017: Given the restoration of most of the buildings impacted by Hurricane Mathew, the move to implement hurricane relief facilities was rescinded and the prudential guidelines for borrowers to access commercial banks’ credit facilities were restored.
• December 2016: In an effort to position the domestic business sector to take more advantage of growth opportunities in the near-term, and to provide more support to housing sector investments, the Central Bank reduced the Discount Rate by 50 basis points to 4.00 percent, effective December 22nd, 2016. The Bank requested that financial institutions follow suit with a corresponding reduction in the Prime Rate, from 4.75 percent to 4.25 percent, and similar adjustments in their lending rate schedules. Commercial banks announced the reduction in the Prime Rate to 4.25%, effective January 5th, 2017.
• October 2016: In the aftermath of damages caused by Hurricane Mathew, and to facilitate access by households and businesses to credit facilities for relief purposes, banks are advised that in respect of hurricane relief facilities:

1. The mandatory 15% equity contribution will not apply
2. The threshold debt service ratio of relevant borrowers is increased to 55% from the 40% - 45% range

• June 2011: Amid signs of a more positive outlook for global growth and the implications for domestic economic activity as well as the improvement in the external reserves position over the past two years, to historic levels, the Central Bank reduced the Discount Rate by 75 basis points to 4.50 percent, effective June 6th 2011. The Bank requested that financial institutions follow suit with a corresponding reduction in the Prime Rate, from 5.50 percent to 4.75 percent, and similar adjustments in their lending rate schedules. Commercial banks announced the reduction in the Prime Rate to 4.75%, effective June 8th 2011.
• February 2005: After considering the persistent level of excess liquidity within the banking system and the outlook for these conditions, which remained buoyant, the Central Bank reduced the Discount Rate by 50 basis points to 5.25%, effective February 14 2005. The Bank requested that financial institutions follow suit with a congruent reduction in the Prime Rate from 6.00% to 5.50% and similar reductions in their lending schedule. Commercial banks announced the reduction in the Prime Rate to 5.50%, effective February 15 2005.
• September 2004: In the aftermath of damages caused by Hurricane Frances, and to facilitate access by households and businesses to credit facilities for relief purposes, lending guidelines issued to domestic banks on 9th August 2004 were temporarily relaxed. Banks were advised that (a) the 15% equity contribution will not apply on such facilities, and (b) the threshold debt service ratio for the relevant borrowers was increased to 55% from the 40%-45% range.
• August 2004: In furtherance of the Bank's continued commitment to monitor domestic economic trends, to ensure that credit expansion is consistent with economic growth, banks were advised to pay particular attention to borrowers' credit worthiness, with the immediate adoption of the following guidelines: a) Limit the existing or resulting total debt service ratio (on the aggregate of personal loans, mortgages, rent, and property maintenance) to 40% - 45% of ordinary monthly income. b) Require a minimum equity contribution of 15% on all personal loans, with the exception of those secured with mortgage indemnity insurance.
• August 2004: Based on the improved outlook for the Bahamian economy, including tourism and foreign investment, which going forward, are expected to provide stronger support for domestic consumption and imports; restrictions on domestic banks' Bahamian dollar lending, in place since 20th September 2001, were lifted.
• March 2002: Given limited usage in the face of the credit tightening measures and more general restraint in private sector consumption, the move that increased commercial banks net external exposure limit was rescinded and the original $0.5 million limit restored.
• November 2001: As a further measure to protecting external reserves and liquidity, on November 30th the Central Bank temporarily increased the net external exposure limit on commercial banks' foreign currency sales to the public to $5.5 million from $0.5 million. Thereby driving an effective wedge of more than $40 million between any continued net outflows and potential reductions in external reserves.
• September 2001: In the wake of the September 11 terrorist attacks on the United States and the significant falloff in tourism activity, the Central Bank imposed a freeze on outstanding bank credit to the private sector. Banks were instructed to provide new credit only to the extent of resources provided from ongoing repayments, but were at liberty to determine how such resources would be allocated within their portfolios.
• July 2001: In view of moderating economic activity, and in order to encourage a sustainable outcome for external reserves and bank liquidity, the Central Bank encouraged lending institutions to adopt a more conservative posture towards private sector lending, including more rigorous application of collateral requirements and scrutiny of creditworthiness.
• June 1999: Amid buoyant liquidity conditions and healthy, expanding levels of external reserves, the Central Bank reduced the Discount Rate by 75 basis points to 5.75%, in order to encourage reduced lending rates on mortgages and loans to the productive sectors. Commercial banks announced a similar reduction in their Prime lending rate to 6.00%, to take effect from July 1999.
• January 1999: Citing an improved outlook for bank liquidity and external reserves, the Central Bank lifted the 25% downpayment requirement from new consumer loans.
• May 1998: In light of an accelerating trend in consumer credit growth, the Central Bank instructed financial institutions to insist on a 25% downpayment or equity requirement on new consumer loans.
• December 1996: The Money Laundering (Proceeds of Crime) Regulations were approved by the Government giving force to the Act. In addition, the Central Bank issued the revised Money Laundering Guidance Notes for Banks in The Bahamas, outlining their obligations under the Act and Regulations as regard, inter alia, monitoring and disclosure procedures in suspected cases of criminal abuse of the financial system.
• October 1995: Parliament approved the Money Laundering (Proceeds of Crime) bill, making it a criminal offence for banks and bank officers to launder the proceeds from any crime, including drug trafficking.
• October 1994: Responding to demands for greater transparency and uniformity in interest rate computation by banks, the Central Bank issued a directive stipulating that the "add-on" method should be discontinued immediately in favour of simple interest rates.
• April 1994: In an attempt to stimulate the domestic economy, the Central Bank decreased the Discount Rate by 50 basis points to 6.5%, and commercial banks lowered their Prime lending rate by the same amount to 6.75%. The Central Bank removed the 6.25% interest rate ceiling on deposit liabilities.
• January 1994: The Clearing Banks Committee and the Association of other Local Financial Institutions agreed among themselves to discontinue the practice of publishing the names of mortgage defaulters whose properties are up for auction.
• August 1993: In a circular issued to authorized dealers and agents, the Central Bank, increased the scope of delegated authority to commercial banks.
• June 1993: There was a 50 basis points reduction in Prime Rate to 7.25%
• May 1993:There was a 50 basis points reduction in Prime Rate to 7.25% As a result of excess liquidity in the system, the Central bank reduced the Discount Rate to 7.0% and the deposit rate ceiling to 6.25%.
• January 1993:  Due to improved liquidity conditions, the Central Bank lifted the 35% equity requirement on consumer instalment credit. The ceiling on deposits was reduced to 6.75% and banks' Prime Rate fell by 25 basis points to 7.75%.
• February 1992: In light of the trend in international interest rates and the prevailing weakness in the local economy, the Bank lowered its Discount Rate to 7.5% from 9.0% and simultaneously reduced the ceiling on deposit rates to 7.0%. Commercial banks responded by reducing the Prime Rate to 8.0%.
• December 1990: As a result of amendments passed to the Central Bank Act in August 1990, the Central Bank issued revised Operating Circulars, imposing fines on both banks' secondary and primary reserve deficiencies at an annual rate of one percent of the deficiency.
• November 1990: To relieve pressure on the country's external reserves vis-a-vis the weakened economic environment and unsustainable private sector credit demand, the Central Bank directed commercial banks to insist upon a minimum 35% down payment (equity) requirement on consumer loans.
• August 1990: The Central Bank Act was amended to allow the Bank to impose fines for secondary reserve deficiencies. The permissible penalty, also to be applicable to primary reserve shortfalls, was set at a maximum of twice the prevailing discount rate --to be applied daily--at the time of the deficiency.
• October 1988: Citing a need to avoid excessive upward pressures on lending rates amid tight liquidity and the bidding up of deposit rates among banks, the Central Bank imposed an 8.00% interest rate ceiling on all new deposits accepted by banks.
• December 1987: The Central Bank designated all Government guaranteed bonds issued by the Bahamas Mortgage Corporation as liquid assets for the purpose of meeting the liquid asset ratio requirement. In an effort to discourage commercial banks' use of the Bank's resources, the Discount Rate was increased to 9.00% from 7.50%, and an interest rate ceiling of 8.00% was imposed on all new deposits in order to limit abrupt shifts in deposits between institutions.
• January 1987: To more adequately facilitate the local purchase of automobiles by temporary residents, the Central Bank instituted a number of specific changes in Exchange Control regulations, including the introduction of Personal Allowance Cards to facilitate multiple foreign currency purchases for payment of overseas credit card bills by residents, up to a total of $2,000 per card.
• May 1986: The Central Bank reduced its Discount Rate from 8.5% to 7.5%, responding to high levels of liquidity in the local banking system, and consistent with prevailing trends in international interest rates. Commercial banks followed by decreasing their prime lending and savings rates to 9.0% and 4.0% respectively.
• May 1985: In the context of slowing credit growth and rising external reserves and liquidity levels, the Bank decreased its Discount Rate by a full percentage point to 8.5%. Commercial banks in turn reduced their prime and savings rates by an equivalent amount, from 11.0% to 10.0% and 6.0% to 5.0%, respectively.
• March 1984: The Central Bank called for stricter adherence to Exchange Control Regulations by residents who were signatories to foreign currency accounts. December 1984: Central Bank raised the minimum lending rate to 9.50% from 9.00%, and reduced the rate for frequent heavy borrowing to 10.00% from 11.00%.
• April 1983: The Bank lowered its discount (bank) rate, the rate at which it lends to banks, to 9% from 10%. However, the rate for frequent and/or heavy borrowing was kept at 11%. This was done in an effort to stem the upward pressure on interest rates, while simultaneously maintaining rates at existing levels.
• November 1982: The Central Bank designated loans granted under the Grants Town Urban Improvement Project and the Government's Low-Cost Housing Schemes as eligible liquid assets for the purpose of meeting the liquid asset ratio requirements.
• March 1982: In an effort to ease the tight liquidity condition in the banking system, the Central Bank placed deposits of the National Insurance Board with selected commercial banks, at rates varying between 9.5% and 10.0%. By year-end, such deposits totalled $11.0 million.
• January 1982: As part of its credit restraint policy, the Central Bank reinstated the 2% surcharge on frequent borrowing by commercial banks, which had been lifted in November 1981; while the effective bank rate was increased to 12%, the actual rate charged fluctuated between 10% and 12%.
• December 1981: Amid historically low levels of liquidity, the Central Bank placed deposits totalling $12.0 million with select commercial banks at rates varying between 9% and 10%. In addition, banks were advised to limit the rate of interest paid on deposits to 10% so as to discourage the continuous shifting of deposits between institutions.
• November 1981: The Central Bank lifted the 2% surcharge on frequent borrowing by commercial banks.
• May 1981: The secondary reserve ratio (liquid asset ratio) was established via a circular issued to all banks, stipulating the manner in which the LAR was to be calculated. The ratio was set at 20% against demand deposits, 15% against time and savings deposits and 15% against fixed deposits and borrowing from commercial banks and Other Local Financial institutions.
• November 1980: To discourage commercial banks from availing themselves of the Bank's accommodation in the wake of strong private sector demand and falling liquidity, the Central Bank imposed a surcharge of 2.0% on loans to banks, thus raising the cost of borrowing from the Central Bank to 13.0%.
• March 1980: The Rate of Interest Act of 1948 was amended to remove the existing ceiling of 20% (annual simple interest) on loans exceeding $100 and 30% on loans of less than or equal to $100 and on all foreign currency loans contracted in Bahamian dollars with banks and trust companies. Eleven years later, in an amendment retroactive to 1948, Parliament would extend removal of the ceiling to non-bank institutions, averting substantial losses by some insurance companies and the likely diminution of domestic pension funds managed by these companies and invested in mortgages.
• February 1980: In the wake of the increasing differential between domestic and international interest rates, the Central Bank and banks agreed to a 200 basis points boost in the prime rate to 11.0%, and the savings deposit rate was increased from 4.0% to 6.0%
• November 1979: In an effort to restrain credit expansion, the Central Bank decided to increase the rate of interest charged on commercial banks' borrowing against the security of registered stocks from 0.5% to 1.0% above the prime rate.
• April 1979: The Nassau prime rate, which stood at 9.5% at year-end 1978, was decreased to 9.0% in an effort to stimulate growth in the domestic credit sector with a view to absorbing the high surplus in liquidity.
• April 1977: The Central Bank issued a general notice to Authorized Dealers announcing, inter alia, an increase in the personal allowance "Dollar Cards" for residents from $200 to $1,000 per annum.
• March 1976: Revised Exchange Control Notices were issued to the Authorized Dealers and Agents on March 1, 1976. New notices covered administrative matters, criteria for direct investment inside and outside The Bahamas and exemptions from certain obligations for non-residents.
• May 1975: As a result of excess bank liquidity and the high levels of surplus bank balances held with the Central Bank, the Bank announced its decision to pay interest on balances in excess of 250% of the Statutory Reserve, at the rate of 4% per annum.
• June 1974: Passage of the Central Bank Act, establishing the successor to The Bahamas Monetary Authority. The statutory reserve ratio, which became effective immediately, was set at 5% of total Bahamian Dollar deposits.
• July 1973: Independence achieved from the United Kingdom.
• February 1973: Collapse of the Bretton Woods system of fixed exchange rates. The Bahamian dollar was devalued by 12.7%; the parity of the Bahamian dollar was reduced to 0.736661 grams of gold.
• June 1972: Redefinition of the Sterling Area by the UK. The value of The Bahamian dollar was fixed against the US dollar at B$0.97 = US$1.00. The gold parity for the Bahamian dollar of 0.843828 grams of fine gold was retained. Prime rate increased to 9.0%.
• June 1971: Clearing arrangements were instituted establishing accounts between each clearing bank and the Bahamas Monetary Authority. These accounts subsequently formed the basis of the statutory reserve established in 1974.
• February 1970: The gold parity of the Bahamian dollar was changed from 0.870898 to 0.888671. The rate of exchange of the Bahamian dollar against the US dollar was set at B$1.00 = US$1.00 and against sterling at B$2.40 = £1.00.