NASSAU, BAHAMAS — A former Central Bank Governor has stated that while banking services in the Bahamas are high, this issue should not be viewed in isolation, as other sectors in the economy display a similar pattern of high costs when compared to other economies.
Julian Francis, speaking on Monday at the Central Banking Series Conference Monday, held in conjunction with the University of The Bahamas and the Global Interdependence Center, also asserted that productivity in The Bahamas is “dismally bad,” adding that the only way to change that is through competition.
“There has been a debate many of us have had for years about whether or not banking services in the Bahamas are too costly, and the simple answer is yes, of course. It’s a very complicated matter because banking services are just one of a whole range of services across the economy. I’ve always felt—and sometimes have had the opportunity to say—that it’s unfair to look at the cost of banking services in isolation. If you look at services generally across the Bahamian economy, you see the same pattern when compared to other economies,” said Francis.
He continued: “If you examined prices across the economy, you would see the same trend that you see in the financial services sector.”
Francis went on to analyze the pricing structure of these services based on data from the Central Bank. “I learned something interesting in doing this,” he said. “Apart from the fact that the prices are high in absolute terms, one metric that stood out was the net income of these banks compared to their average assets. On average, from 2015 to 2021, these banks earned about 1.86 percent per year on their assets, which is considered high by international standards—generally, you wouldn’t expect retail banks to earn more than one percent on assets.”
He noted that the ratio of net income to average assets had increased after the COVID-19 period. “Between 2022 and 2024, this ratio has risen to 3.54 percent per year—twice what it was in the previous seven years,” Francis said. “This is extremely high, and the Bahamian public should rightly be concerned about this.”
While acknowledging the complaints from the public and government responses, Francis explained that the Central Bank of the Bahamas is not a price regulator, but rather a prudential regulator focused on maintaining the soundness of the banking system. “The Central Bank’s role is to prevent hugely disruptive bank failures. It is also concerned with price levels, but it has very limited capacity to influence prices because of exchange controls,” he explained.
He further noted that retail banks in The Bahamas are shedding costs, reducing their footprint, and adopting electronic tools to deliver services. “You would think this would bring the cost of services down, but despite this, costs are going up,” he said. “Policymakers need to look seriously at this issue.”
Francis concluded by addressing the issue of competition, stating: “Retail banks have a license from the government through the Central Bank to provide a sort of monopoly on banking services. They’re not subjected to competition. You would think that they would understand that as part of the deal, they should keep prices reasonable and provide the scope of services required by the economy. But apparently, they don’t see it that way.”
