## The Bahamas: Financial System Stability Assessment

_IMF Staff Country Reports, July 1, 2019_

## Source details

**Canonical URL:** [The Bahamas: Financial System Stability Assessment](https://www.imf.org/en/publications/cr/issues/2019/07/02/the-bahamas-financial-system-stability-assessment-47068)

## Other formats

- [Markdown version](/en/publications/cr/issues/2019/07/02/the-bahamas-financial-system-stability-assessment-47068/index.md)
- [Structured JSON version](/en/publications/cr/issues/2019/07/02/the-bahamas-financial-system-stability-assessment-47068/index.json)
- [Bundle manifest](/en/publications/cr/issues/2019/07/02/the-bahamas-financial-system-stability-assessment-47068/bundle-manifest.json)

## Bibliographic details
- Published: July 1, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498323277.002

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### Executive summary and systemic assessment
- The Bahamas appears to be resilient to current threats to its financial stability, but action is needed to safeguard against potential weaknesses.
- There is a large stock of problem assets that needs to be dealt with from a variety of perspectives: systemic risk monitoring, banking supervision, and crisis management.
- Vulnerabilities to natural disasters and external economic contagion heighten the need to address problem assets and systemic weaknesses.
- The banking sector dominates the financial system and has focused on residential mortgages and consumer loans during a long period of economic stagnation.
- Despite poor growth the sector has remained profitable.
- The small domestic residential property market backing most secured lending is prone to shocks and illiquidity.
- High and persistent levels of nonperforming loans (NPLs) have historically occurred, significantly increasing uncertainty and fragility in the banking system.

### Key findings and risks
- Large stock of problem assets requiring coordinated responses across:
  - Systemic risk monitoring
  - Banking supervision
  - Crisis management
- Concentration risks:
  - Banking sector concentrated in residential mortgages and consumer loans
  - Domestic residential property market is small, prone to shocks, and illiquid
- External and environmental vulnerabilities:
  - Exposure to natural disasters
  - Exposure to external economic contagion
- Asset quality and stability:
  - Historically high and persistent NPLs create significant uncertainty and fragility
- Profitability vs. fragility:
  - Banks have remained profitable despite prolonged poor economic growth, masking underlying asset-quality risks

### Policy implications and recommended focus areas
- Strengthen systemic risk monitoring to identify and track the large stock of problem assets.
- Reinforce banking supervision to address concentrated exposures to residential mortgages and consumer loans.
- Enhance crisis management frameworks to handle shocks amplified by an illiquid domestic property market.
- Incorporate natural disaster and external contagion scenarios into stress testing and contingency planning.
- Develop strategies to resolve or mitigate high and persistent nonperforming loans to reduce uncertainty and fragility in the banking system.

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## Content in this bundle

- **The Bahamas: Financial System Stability Assessment; IMF Country Report No. 19/199; May 16, 2019**
  - [The Bahamas: Financial System Stability Assessment; IMF Country Report No. 19/199; May 16, 2019 (Markdown version)](/-/media/files/publications/cr/2019/1bhsea2019002.pdf.md){rel="alternate" type="text/markdown"}
  - [The Bahamas: Financial System Stability Assessment; IMF Country Report No. 19/199; May 16, 2019 (PDF)](/-/media/files/publications/cr/2019/1bhsea2019002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2019/07/02/the-bahamas-financial-system-stability-assessment-47068_