Barbados features one of the most stable banking systems worldwide. There is perhaps no better test of the strength and stability of a banking system than the recent worldwide economic downturn that caused the demise of reputable banks around the globe. Barbados’ banks survived this devastation unscathed. The system’s stability means that foreign investors can be confident that their investments are safe and well protected in Barbados.
The Central Bank of Barbados
The Central Bank of Barbados was established in 1972 to promote sustainable economic development in the country. The Central Bank has a leading role in ensuring the stability of the entire banking sector as well as regulating the commercial banks.
Some key functions of the Central Bank include:
• Regulating the issue, supply and availability of money
• Acting as banker to the Government and commercial banks
• Managing the country’s foreign exchange reserves
• Supervising the operations of all financial institutions, especially the commercial banks
The Central Bank plays an important role in licensing and regulating financial institutions including commercial banks and holding companies, trusts, finance and merchant banks as well as offshore banks. Under the Central Bank’s supervision, the island’s banks are highly regulated institutions.
The Bank Supervision Department is in charge of regulation and its functions include:
• Developing legislation and regulations for the financial system
• Inspecting financial institutions licensed under the Financial Institutions Act and the Offshore Banking Act, to ensure that the operations are safe and in compliance with legislation
• Reporting on the performance and condition of each licensed financial institution
Banking Services for Offshore Companies
Barbados features many familiar names in the international banking sector that offer wealth management and private banking services to high net worth clients and to the offshore companies that are registered on the island. These services are offered by:
• RBC Royal Bank
• CIBC FirstCaribbean International Bank
• Scotiabank Private Client Group
• Barbados National Bank (BNB) International Services
• Butterfield Bank Wealth Management.
These banks allow customers to hold accounts in major world currencies including US Dollars, United Kingdom Pounds, Euros and Canadian Dollars. They also offer foreign currency exchange services for all major currencies. Furthermore, there are no exchange controls in effect for non-resident clients and their international companies. The banks will also provide clients with all of the banking products that come with regular personal bank accounts including online banking, debit and credit cards.
These banks are all highly regulated and their clients’ funds are well protected. In fact, the funds held in Barbados are often safer than those in some of their clients’ home countries.
High net worth individuals benefit from tax credits that reduce the taxes that a resident, non-domiciled individual has to pay on his foreign income. Additional benefits include the fact that there are no capital gains or inheritance tax levied on the island.
There are many offshore banks that are registered in Barbados to take advantage of the low tax rates ranging from 2.5% down to 0.5% on taxable profits. Additional benefits available to these banks include exemptions from withholding taxes on dividends and interest, as well as no capital gains tax. There are also no exchange controls applied to the bank’s transactions.
The qualification requirements for establishing an international bank on the island note that the bank must conduct international transactions including foreign deposits, foreign debt and bonds, and any other activities involving foreign money and securities. Minimum capital requirements are US $2 million for banks that accept third party deposits and US $500,000 for banks that do not accept third party deposits.
Strength and Stability
The banking system in Barbados stands out as being safe and well regulated compared with many other jurisdictions worldwide. This is especially important during this time of economic uncertainty that has affected banks and markets around the globe. The stability offered by the banks in Barbados is welcomed by international investors who are looking for a safe haven for their funds, protected from the current economic turbulence taking place elsewhere.