It is an objective of the Bahamas Government to encourage the presence of legitimate and reputable financial institutions. To this end, banking regulations have been kept to a minimum to allow flexibility of operation whilst maintaining careful screening of initial licence applications and reasonable supervision of subsequent banking operations.

The two principal legislative Acts which govern the activities of a bank and/or trust company are The Banks Act and The Banks and Trust Companies Regulation Act. The primary requirement of the latter Act is that all banks and/or trust companies with a presence in The Bahamas must be licensed by the Central Bank of The Bahamas. There are various categories of licence which are set forth, together with the applicable fee structure and minimum capital requirements, in the three page annex available to go with this memorandum marked "A". (See further as regards capitalization below).

Whether the proposed banking operations in The Bahamas are to be of a representative nature, or as a fully fledged bank, open to the general public, a Public Category licence would apply. Non-active Categories are a designation of convenience to allow a licencee to temporarily suspend banking operations, whilst continuing the licence in existence, pending revival at a future date. Restricted Categories apply to banks conducting banking business for a select group of private clients (usually fewer than ten in number) who would be named on the licence.

The bank's physical presence in The Bahamas need only be by representation by a Trust Company or a firm of Accountants, both of whom offer managed banking services, without the necessity, unless so desired, of the bank's own local office premises.

Before a detailed written licence application is made, it is often advantageous to make formal contact with, and to meet, Central Bank officials, in order to explain such matters as the identification of the parent bank, the nature and volume of business expected in The Bahamas, etc. and to obtain the views of those officials on particular aspects of the application and proposed operation. This would also provide an opportunity to seek guidance on the category of licence appropriate to the circumstances.

A detailed written application is required in due course. The minimum content of this is specified in the annex available to go with this memorandum, marked "B". In addition, the Central Bank also requires evidence that the banking supervisory authority having jurisdiction over the head office of the bank has approved the establishment of a Bahamian operation.

If any of the supporting documentation is not in the English Language (such as incorporation documents), these documents should be accompanied by a translation into English, certified by a competent authority in the jurisdiction of incorporation of the head office.

Upon receipt of a properly completed application, the Central Bank will review the contents and contact third parties, e.g. auditors, referees, etc. to verify the information provided.

In addition, principals supporting the application will ordinarily be required to attend an interview at the Central Bank sometime during the application process, at which further information relating to the financial profile of the parent and/or affiliated companies, and relating to organizational structure, internal control systems and reporting procedures of the applicant bank.

Although there are stated minimum capital requirements, the capitalization actually required will be determined having regard to the profile of the Promoters, types of proposed activities and volume of business projected for the first three-year period. The following information may be used as guidelines:

(A) The minimum paid-up capital for a public bank and/or trust is $1,000,000.00. However, higher level of minimum capital may be required on a case-by-case basis with reference to the parameters outlined above. There is no minimum (assigned) capital for branches.

Public banks and/or trust companies are required to increase their capital position to 5% of total assets or 8% of risk assets, whichever is greater, as their business grows.

For public trust licensees a fidelity or bankers blanket bond coverage of $1,000,000 is also required.

(B) The minimum capital requirements for the restricted categories vary from $10,000 to $100,000 as specified in Annex A hereto. However, as stated above, higher levels of minimum capital may be prescribed in individual cases having regard to parameters listed earlier.

Once this stage is complete, the Central Bank will advise the Minister of Finance as to the issue, or not, as the case may be, of the licence.

Although the licence application is the most important procedure, there are other formalities which must be completed. For example, the incorporation of a Bahamian company, or the registration of a branch of a foreign company. This is a matter of choice, and the determining factors usually derive from considerations of a legal, regulatory or taxation nature affecting the parent bank in its own country of incorporation, or otherwise from factors external to The Bahamas. Also the bank must obtain a business licence, however, banks and trust companies are exempted from payment of any fee therefore by virtue of their bank/trust licence.

Once licensed, The Banks Act requires the publication of an annual statement of account. In the case of a Bahamian company, as a matter of policy, the auditor's report on the accounts must be issued by a firm of chartered accountants practicing in The Bahamas. Branches of foreign-incorporated companies are permitted to publish accounts of the bank as a whole, rather than those limited to the Bahamian branch. In addition to publication as aforesaid, the bank is required to submit to the Central Bank a complete set of financial statements on an annual basis.

The existence of legislation providing for the preservation of secrecy, in addition to the Common Law requirement of confidentiality, continues to be one of the principal attractions of The Bahamas as the location of banking and/or trust activities. The Banks Act restricts disclosure of information relating to the affairs of a bank or of the customer of a bank by any person who has acquired such information in the performance of his duties or the exercise of his functions under The Banks Act. Criminal penalties exist for cases of improper or unauthorized disclosure.

Professional fees in connection with a licence application usually fall in the region of $5,000 to $8,000, depending upon the amount of time actually expended by members of the Firm. In addition, all out-of-pocket expenses and disbursements will be billed. The official licence fees are contained in the annexes available to go with this memorandum.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.