Central Bank: Financial systems must be ‘storm-proof’

Central Bank: Financial systems must be ‘storm-proof’
Central Bank of The Bahamas

NASSAU, BAHAMAS — The Bahamian financial system and the Central Bank needs to consider how better to “storm proof” themselves, according to the regulator on ‘lessons learned’ from the Hurricane Dorian.

The Central Bank released a summary of lessons regarding the financial stability outcomes arising from Hurricane Dorian, along with some early lessons from the COVID-19 outbreak.

“Global warming trends are likely to lead to further financial instability, through the increased risk of a catastrophic hurricane striking New Providence,” the bank stated.

It continued: “The Bahamian financial system and the Central Bank need to consider how to better “storm-proof” ourselves…we need to create universally available mobile phone payments in Bahamian dollars.”

The regulator noted that the national adoption of the Central Bank digital currency, Sand Dollar, should help to address this concern. 

The bank also noted that Bahamian insurance arrangements are currently “reasonably good, and well-integrated with banking exposures”.  

It added: “At the margin, we have identified several steps that would improve the insurance/banking links.”

The regulator further noted that Bahamian households and businesses must be encouraged to better protect themselves from catastrophic financial impacts. 

The bank continued: “These protective measures must include purchasing comprehensive insurance coverage, building up in savings, and ensuring that buildings meet relevant codes.

“The Bahamas needs to consider how collective action schemes, for example national catastrophe insurance and reinsurance programs, might improve our national financial resilience.

“The Central Bank intends to work with the government, other Bahamian regulators, and the financial services industry to clarify and deliver the reforms necessary to improve our financial resilience in the face of an increased risk of natural disasters.”