The Crisis Management Legislative Framework is inclusive of the Central Bank of The Bahamas Act 2020, the Banks and Trust Companies Regulation Act 2020, and the Protection of Depositors (Amendment) Act, 2020.
Collectively, they seek to bring about reforms that will, inter alia:
Central Bank of The Bahamas Act, 2020
The Central Bank of The Bahamas Act 2000 has been repealed and replaced by the Central Bank of The Bahamas Act, 2020. The Central Bank of The Bahamas Act (“the CBA”) is a critical piece of legislation as it governs all financial institutions supervised by the Central Bank.
The CBA has brought about imperative changes as it seeks to modernize the law governing the Bank and articulate a clearer and more robust legal framework for the Bank’s governance and accountability. Some of these changes include:
Banks and Trust Companies Regulation Act, 2020
The Banks and Trust Companies Regulation Act, 2020 (“the BTCRA”), modernizes the resolution framework for banks in The Bahamas, in line with best international practices. The BTCRA gives the Central Bank enhanced powers to resolve troubled banks.
Key provisions of the BTCRA include the following:
01. New Bank Resolution Framework
Section 35 establishes the objectives to which the Central Bank must have regard when exercising any of its’ resolution powers. These objectives include, inter alia protecting depositors, ensuring continuity of critical financial services, minimizing the cost of resolution and protecting public funds.
Section 36 authorizes the Central Bank to require banks to prepare recovery plans detailing what steps they would take in the event of a financial distress or failure. The Central Bank is also empowered to prepare its own resolution plan, in consultation with a bank, to identify options for the use of its resolution powers and tools; and to direct a bank to remove significant impediments to resolution.
02. Statutory Administration
Section 38 authorizes the Central Bank to appoint a statutory administrator, without a court order, in prescribed circumstances such as, for example, if a bank has engaged in an unsafe and unsound practice leading to the weakening of the bank’s condition, undermining of depositors’ interests or dissipation of the bank’s assets. The statutory administrator may be appointed for twelve months initially and the Central Bank may extend this period for a further twelve months if additional time is required to restructure a bank placed under statutory administration.
03. Liquidation of Banks
Section 58 of the BTCRA, limits and modifies the application of the Companies Act to the new bank resolution regime particularly in the case of a bank liquidation. Further, there are new provisions that prohibits the voluntary liquidation of a bank without the Bank’s pre-approval and outlines the circumstances in which the Bank may appoint a liquidator for the compulsory winding up of a bank.
Protection of Depositors (Amendment) Act 2020
Key amendments under the Protection of Depositors (Amendment) Act 2020 enhance the corporate governance framework of the Corporation, reduced time within which the Corporation must make payouts to depositors following the failure of a member institution. Also co-operative credit unions have been included in the membership of the Deposit Insurance Fund.
A new Schedule has also been added which prescribes the constitution and functions of the board of the Corporation.