Banker and Advisor to Government

Yes. Generally, commercial banks do accept Bahamas Government Registered Stock (BGRS) as collateral, if the person named on the certificate wishes to obtain a loan.

Effective September 1, 2020 dematerialization of BRS certificates came into effect.

What does this mean?

1. Investors will no longer receive physical certificates following BRS initial Public Offerings. A transaction confirmation sowing the amounts purchased, and other details will be sent to each participant's email address of record within 3-5 business days following the settlement date.

2. Surrendering physical certificates is no longer required for transactions such as bond transfers and early redemptions. Requests can be made by completing the appropriate form online at www.centralbankbahamas.com/brs-forms and returning it by email to [email protected].

3. Principal payments are now automatically paid to the investor's bank account of record. There is no longer a need to deliver physical certificates to the Central Bank or send in images by email

Bahamas Registered Stock (BRS) holders may sell their stock to the Central Bank. Persons wishing to sell their holdings over-the-counter to the Central Bank, must complete the Redemption Request Form (available on the Central Bank’s website) and submit, with copies of a valid form of identification, the request to the Markets Unit of the Banking Department at [email protected]. On average, requests are processed within two business days.

For customers who purchased BRS via a brokerage account; redemption requests are required to be submitted via the licensed broker. The request form must be signed by an authorized signatory of the brokerage house.

Proceeds of the redemption process will be directly deposited to the customer’s bank account aligned with the banking information held on file with the Central Bank.

The Central Bank of The Bahamas functions as the Official Registrar for securities of the Government. Bahamas Government Registered Stock (BGRS) may be purchased by one of two means:

1. Initial Public Offering: Prospectus for new stock offerings are published in daily newspapers, and may also be obtained by the general public from either the Central Bank, the Public Treasury, or any commercial bank. Interested investors are required to submit applications to the Central Bank no later than the stipulated deadline. Notably, purchase funds must also be submitted at the time of application or Real-Time Gross Settlement (RTGS) instructions, for amounts in excess of $1.0 million.
2. Over-the-counter purchase: Interested investors may contact the Central Bank's Banking Department, and should provide the following information: the amount of the desired investment and the type of maturity, or more specifically the period of time over which they wish to hold the security. The Bank will then select an issue in its own portfolio most suitable to the investor's needs and within two business days, is able to make an offer.

Previously, individual purchasers of BGRS had to be Bahamian citizens aged 18 years or older (persons are permitted to purchase stock on behalf of minor children, as long as they are held in trust for those children until they reach majority age). Additionally, institutional investors were either companies that were Bahamian owned, or in the case of banks, licensed to carry out domestic banking. Where investments were made by pension funds, only funds established exclusively for the benefit of Bahamians were permitted to purchase BGRS.

Since January 2006, the Central Bank eased its restrictions on the ownership of Government debt securities, to allow temporary and permanent residents (with restricted right to work) to purchase these securities, provided they do not exceed a limit of $100,000 per person/entity, and are funded from Bahamian dollar (B$) earnings.

The Central Bank of The Bahamas, as agent for the Government, advertises all T-Bill issues on the Government's behalf. Commercial banks, insurance companies and other interested persons, would then tender, or apply for the bills, which are issued in units of $100. Applications are made for the bills in amounts that applicants wish to hold, and at a rate that reflects the amount they wish to earn.

For example, if a company were to tender for a bill in the amount of $100, it might apply at a rate of 98%. This would mean that the company wishes to purchase a bill, which has a face value of $100.00, but is only prepared to pay $98.00 for it. The difference represents the amount it would like to earn from lending the Government $98 for a period of usually 91 days. On an annual basis, this would amount to an interest rate of 8% per year.

There are at least four interest rates associated with Treasury bill issues:

1. The Average Tender Rate refers to the average of all accepted bids, i.e. the actual amount paid for each $100 Treasury bill.
2. The Average Discount Rate is determined by subtracting the average tender rate from 100 and multiplying by 4.
3. The Market Rate is the rate the Central Bank charges on Treasury bills purchased from its portfolio. It is determined as the Average Discount Rate, less 0.1%.
4. The Rediscount Rate refers to the rate used by the Central Bank to discount Treasury bills offered for sale before maturity. It is determined as the Average Discount Rate plus 0.5%.

As a means of financing expenditure, the Bahamas Government is able to borrow from the private sector through the issuance of its own financial securities. It uses primarily two types of securities: the Treasury bills (T-bills) and Bahamas Government Registered Stock (BGRS).

The T-bill, which carries maturities of less than one year from the date of issue, provides short-term financing to the Government. They are issued to the investor at a discount, which means that the price paid for them is below the actual face value. Upon maturity, the investor receives an amount equal to the face value of the T-bill, thus earning income equivalent to the difference between the price paid for the security at issue and the amount received at maturity.

BGRS, which carry maturities in some instances of up to 30 years, provide long-term financing to the Government. With a minimum investment of $100, they are issued at par, in multiples of 100, and carry interest rates which, if not fixed, are usually tied to the Bahamian Prime Rate. The investor then receives interest income, which is normally paid semiannually, and the principal investment at maturity.