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The Central Bank

Monetary Policy is the term used to characterise the measures taken by a central bank, in order to influence an economy. This is done principally through the central bank's regulation of the flow of money and credit in the banking system. In The Bahamas, the fundamental objective of monetary policy has always been to maintain stable credit and other conditions to support the fixed parity between The Bahamian and U.S. dollars, which has prevailed since 1973, while simultaneously allowing the economic development objective to be pursued.

Fiscal Policy is the term used to characterise measures taken by a government to influence an economy. These decisions involve mainly government's use of expenditure and taxation policies to bring about desired macroeconomic objectives.

Persons can subscribe to the Annual Report by writing to the Bank. This and all other publications are also available on the Bank's website. The Bank's publications are free of charge to the public.

The Central Bank produces four publications: the Annual Report, Quarterly Economic Review, Quarterly Statistical Digest and the Monthly Economic and Financial Developments Report, which are available to the public free of charge. Quarterly publications are issued in February, May, August and November, while the Annual Reports are available by April of the following year.

The sanddollar is an invertebrate marine animal that has a flat disk-shaped body. It is particularly well adapted for burrowing in sand banks. The entire surface of the animal's body is covered by small spines, which are used for digging and crawling. The mouth is located in the centre of the body's underside and on the upperside there is a pattern of five 'petals' spreading out from the centre.

The selection of the sanddollar as the logo of the Central Bank was made by the first Governor, Mr. T. B. Donaldson, who, in addition to wanting something Bahamian, was 'intrigued by the elegance and history' of this unusual specimen of marine life, of which an interesting legend exists. The markings on the shell of the sanddollar are said to symbolize the birth, crucifixion and resurrection of Christ.

On the topside of the shell, an outline of the Easter Lily is clearly seen. At the centre of the Lily, a five-pointed star representing the Star of Bethlehem appears. The five narrow openings are said to be representative of the four nail holes and the spear wound made in the body of Christ during the Crucifixion. Easily recognizable on the reverse side of the shell is the outline of the Christmas Poinsettia and also the Bell. When broken, inside the shell are five birds called Doves of Peace. Some say they are the Angels that sang to the shepherds on the first Christmas morning.

The Central Bank is a statutory body, distinct and separate from the central government as set out in the Central Bank of The Bahamas Act, 2000, Section 3, Subsection

(2): The Bank shall be a body corporate having perpetual succession and a common seal and subject to the provisions of this Act, with power to acquire, hold and dispose of movable and immovable property of whatever kind, and to enter into contracts and to do all things necessary for the purpose of its functions.

The Bank is run by a Board of Directors, which has overall responsibility for policy and the management of its affairs and business.

The present Governor of the Central Bank is Mr John A. Rolle, who has held this position since January 2016. Mr. Dereck Rolle is the current Deputy Governor, having been appointed August 1, 2017. Former Governors are Mrs Wendy M. Craigg (2005 - 2015), Mr Julian W. Francis (1997 - 2005), Mr James H. Smith (1987 - 1997), Sir William C. Allen (1980 - 1987) and Mr T. Baswell Donaldson (1974 - 1980). Previous Deputy Governors are Mr. Michael Lightbourne (2007-2017), Mrs Wendy M. Craigg (1997-2005), Mr Julian W. Francis (1993 - 1997), Mr Hubert L. Dean (1981 - 1992 ) and Sir. William C. Allen (1974 - 1980).

The Central Bank generates income from the following sources:

  1. Interest earned on advances made to Government and on holdings of Treasury bills and Registered Stocks;
  2. Interest earned on foreign currency securities and deposits;
  3. Commissions received on foreign exchange transactions; and
  4. Royalties and commissions earned from numismatic coin sales.

The Central Bank does not accept deposits or make loans to private individuals. However, as the banker to the Government, it accepts deposits from the Government, public corporations and international financial institutions. The Central Bank lends to the Government by means of direct advances and/or by buying Government securities, such as Treasury bills and Registered Stocks. The Bank may also lend to commercial banks, which is normally done against the security of Registered Stock.

Date Rate
1980 10.00%
Apr-83 9.00%
Dec-84 9.50%
May-85 8.50%
May-86 7.50%
Dec-87 9.00%
Feb-92 7.50%
May-93 7.00%
Apr-94 6.50%
Jul-99 5.75%
Feb-05 5.25%
Jun-2011 4.50%
Dec-2016 4.00%

 

The Discount or Bank Rate, which is set by the Central Bank of The Bahamas, is the interest rate charged by the Bank on loans to banks. Commercial banks usually respond to changes in the Discount Rate with proportionate changes in their Prime Lending Rate. The Discount Rate is an instrument of Discount Policy, and is used by the Bank to influence the flow of money and credit in a desired direction. For instance, since people's borrowing decisions, whether for investment or consumption purposes, is influenced by the interest rate charged on that borrowing, an increase(decrease) in the Discount Rate signals a desire by the Bank to slow(quicken) the rate of increase in credit expansion, since higher(lower) interest rate charges are likely to discourage(encourage) new borrowing.

By law, deposit money banks are obliged to hold a specified proportion of their deposits in cash or near-cash assets known as reserve requirements. Banks are prohibited from using such reserves to extend loans to customers. An increase in this requirement would limit the amount of loans that a bank is able to extend to its clients, whereas a reduction would increase the amount of funds available for lending. The Central Bank then, is able to influence the supply of money by either increasing or decreasing this requirement.

There are two types of reserve requirements employed by the Bank. In accordance with the Central Bank of The Bahamas Act, 2000, banks are required to maintain primary reserves referred to as the 'Statutory Reserve', against their Bahamian dollar liabilities. Since coming into force in 1974, the ratio has been unchanged at 5.0%, although the Bank does have the authority to raise it to 20.0%.

The Central Bank is also empowered to impose a secondary reserve, called the Liquid Asset Ratio(LAR), which mandates banks to maintain an average ratio of liquid assets in relation to their Bahamian dollar deposit liabilities. The LAR is currently set at 20.0% of demand deposits, 15.0% of savings and fixed deposits, and 15.0% of borrowings due to or from the Central Bank as well as inter-bank.

Among the functions of the Central Bank of The Bahamas, the regulation of the supply of money and credit is especially important to the Bank's overall objective of monetary stability. Accordingly, there are five primary instruments through which the Bank seeks to influence the flow and supply of money and credit in the banking system: Reserve Requirements, Discount Policy, Selective Credit Controls, Moral Suasion and Open Market Operations. In The Bahamas, while Open Market Operations have been employed within a very limited context, and Reserve Requirements have remained virtually unchanged, Discount Policy--supplemented by Moral Suasion--have been used with far greater regularity, and have been most effective in the Bank's efforts to manage bank liquidity.