The Bahamas: Operationalizing the New Bank Resolution Framework and Amended Deposit Insurance Legislation - Second Mission

High-Level Summary Technical Assistance Reports, August 22, 2023

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The Bahamas has made considerable progress in developing the legal framework, infrastructure, and key tools for an effective bank recovery and resolution regime and is taking steps to operationalize the regime.
Effective operationalization will require review and reform in related framework areas, including contingency arrangements for public resolution funding, full implementation of the deposit insurance system, and establishment of a program of regular testing.
Strengthening and updating supervisory early intervention and recovery planning frameworks and requirements is critical given limits in the structure and depth of the financial system that constrain resolution options.
Enhancement of underpinning legislation is recommended to support building out and implementing operational infrastructure for bank resolution.

Legal and institutional framework: Considerable progress achieved toward an operational bank recovery and resolution regime.
Operational gaps: Remaining needs include contingency arrangements for public resolution funding if required, and completing implementation of the deposit insurance system.
Testing and preparedness: A program of regular testing (safety net testing) is needed to ensure operational readiness.
Supervisory frameworks: Supervisory early intervention and recovery planning frameworks and requirements need strengthening and updating to maintain financial system stability.
System constraints: The acknowledged limits of the structure and depth of the financial system constrain available resolution options.

Review and reform contingency arrangements for public resolution funding if required.
Fully implement the deposit insurance system to ensure credibility and operational capacity.
Establish and maintain a program of regular testing (safety net testing) for resolution arrangements and tools.
Strengthen and update supervisory early intervention frameworks and recovery planning requirements to improve preventiveness and resolvability.
Enhance underpinning legislation to enable the build-out and implementation of operational infrastructure for bank resolution.