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Monday, September 28, 2009

Bahamas Financial Services Board: Exit sparks offshore exodus fears

By INDERIA SAUNDERS ~ Guardian Business Reporter ~

The head of the Bahamas Financial Services Board (BFSB) is moving to allay concerns that The Bahamas will see a mass exodus of offshore banks on the heels of the pending exit of BNP Paribas.

It's a response sparked by that bank's decision to withdraw before the end of 2010 from countries gray listed by the OECD and viewed as "tax havens".

"It's a time of change and there will always be some amount of unsettlement in an industry of our size," Executive Director Wendy Warren told Guardian Business. "It's important to emphasize that government will maintain continuous dialogue with the industry... in the coming months The Bahamas will meet standards in a judicious matter."

Warren said she was unaware of any more banks that were preparing to follow in BNP's footsteps, asserting that it was mostly understood throughout the sector that The Bahamas is just months away from moving off the Organization for Economic Cooperation and Development (OECD) gray list.

A minimum number of 12 tax information exchange agreements (TIEAs) are required by a jurisdiction to satisfy the standard set by the OECD, which has now put pressure on "tax havens" for greater disclosures.

The Bahamas' current placing on the gray list is a primary reason why BNP CEO Pascal Dulau said the company has made the decision to exit the country.

"Despite its excellent financial performance in the current economic crisis, BNP Paribas has conducted a global review of its network in the context of the ongoing changes in the world financial system and G20 initiatives," said Dulau.

"In the light of this review, BNP Paribas has taken the decision to withdraw before the end of 2010 from countries grey listed by the OECD and viewed as tax havens.

"This includes The Bahamas."

According to Dulau, the bank was currently deciding the better of two options — either selling part of the business or transferring it to another jurisdiction. He did say, however, that the company had no fixed schedule for departure, saying it would depend largely on if they are able to "fix everything" before the end of 2010.

"In its exit strategy, BNP Paribas (Bahamas) Limited will preserve in the best manner the interest of its clients and 40 local staff members," he said. "As always, it is BNP Paribas' objective to act in this critical period as a responsible local and international player."

Dulau said there was no possibility to reverse the decision, even after The Bahamas moved off the gray list. Some local analysts indicate, however, that there is more to BNP's exit than the OECD's pressure.

September 28, 2009