6. Financial Sector
Capital Markets and Portfolio Investment
Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, although some restrictions may be imposed during exceptional periods of low liquidity. Historically, the CBB independently raised or lowered interest rates without government intervention. There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.
Barbados continues to review legislation in the financial sector to strengthen and improve the regulatory regime and attract and facilitate retention of foreign portfolio investments. The government continues to improve its legal, regulatory, and supervisory frameworks to strengthen the banking system. The Anti-Money Laundering Authority and its operating arm, the government’s Financial Intelligence Unit, review anti-money laundering policy documents and analyze prudential returns.
The Securities Exchange Act of 1982 established the Securities Exchange of Barbados, which was reincorporated as the Barbados Stock Exchange (BSE) in 2001. The BSE operates a two-tier electronic trading system comprised of a regular market and an innovation and growth market (formerly the junior market). Companies applying for listing on the regular market must observe and comply with certain requirements. Specifically, they must have assets at least USD 500,000 and adequate working capital, based on the last three years of their financial performance, as well as three-year performance projections. Companies must also demonstrate competent management and be incorporated under the laws of Barbados or another regulated jurisdiction approved by the Financial Services Commission. Applications for listing on the innovation and growth market are less onerous, requiring minimum equity of one million shares at a stated minimum value of USD 100,000. Reporting and disclosure requirements for all listed companies include interim financial statements and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the CBB to trade securities on the BSE.
The BSE publicized its intent to fully immobilize traditional share certificates and to computerize clearance and settlement through the Barbados Central Securities Depository Inc., a wholly owned subsidiary of the BSE. The FSC under the Property Transfer Tax Act, can accommodate investors requiring a traditional certificate for a small fee. The Financial Services Commission also regulates mutual funds in accordance with the Mutual Funds Act.
The BSE adheres to rules in accordance with International Organization of Securities Commissions guidelines designed to protect investors, ensure a fair, efficient, and transparent market, and reduce systemic risk. Public companies must file audited financial statements with the BSE no later than 90 days after the close of their financial year. The authorities may impose a fine not exceeding USD 5,000 for any person under the jurisdiction of the BSE who contravenes or is not in compliance with any regulatory requirements.
The BSE launched the International Securities Market (ISM) in 2016. It is designed to operate as a separate market, allowing issuers from Barbados and other international markets. The ISM is founded on a strong regulatory framework. To date, the ISM has five listing sponsors.
The BSE collaborates with its regional partners, the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange, through shared trading software. The capacity for this inter-exchange connectivity provides a wealth of potential investment opportunities for local and regional investors. The BSE obtained designated recognized stock exchange status from the United Kingdom in 2019. It is also a member of the World Federation of Exchanges.
Barbados has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement and maintains an exchange system free of restrictions on current account transactions.
Money and Banking System
The government established the Central Bank of Barbados in 1972. The CBB manages Barbados’ currency and regulates its domestic banks.
The Barbados Deposit Insurance Corporation (BDIC) provides protection for depositors. Oversight of the entire financial system is conducted by the Financial Oversight Management Committee, which consists of the CBB, the BDIC, and the FSC. The private sector has access to financing on the local market through short-term borrowing and credit, asset financing, project financing, and mortgage financing.
Commercial banks and other deposit-taking institutions set their own interest rates. The CBB requires banks to hold 17.5 percent of their domestic deposits in stipulated securities.
Bitt, a Barbadian company, introduced a blockchain-based digital mobile wallet service for consumers. Bitt offers a digital asset exchange, remittance channel, and merchant-processing gateway available via a mobile application. The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services. This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers. Bitt completed its participation and formally exited the sandbox in July 2019. The CBB concluded that the company’s digital wallet service is a good candidate for regulation under legislation that is currently being drafted.
International banks domiciled in the United States, Canada, and Europe are reviewing their correspondent banking relationships in regions they deem high-risk for financial services. The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks. CARICOM remains committed to engaging with key stakeholders on the issue.
Foreign Exchange and Remittances
Barbados’ currency of exchange is the Barbadian dollar (BBD). It is issued by the CBB. Barbados’ foreign exchange operates under a liberal system. The Barbadian dollar has been pegged to the United States dollar at a rate of BBD 2.00: USD 1.00 since 1975. This creates a stable currency environment for trade and investment in Barbados.
Companies can freely repatriate profits and capital from foreign direct investment if they are registered with the CBB at the time of investment. The CBB has the right to stagger these conversions depending on the level of international reserves available to the CBB at the time capital repatriation is requested.
The Ministry of Finance, Economic Affairs and Investment controls the flow of foreign exchange and the Exchange Control Division of the CBB executes foreign exchange policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of USD 10,000 per year (effective July 1, 2019) for personal travel and up to a maximum of USD 25,000 for business travel. The CBB must approve conversion of any amount over these limits. International businesses, including insurance companies, are exempt from these exchange control regulations.
Barbados is a member of the CFATF. In 2014, the government of Barbados signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in Barbados to report the banking information of U.S. citizens.
Sovereign Wealth Funds
Currently, the CBB does not maintain a sovereign wealth fund. In the past, the government announced plans to create a sovereign wealth fund to ensure national wealth is available for present and future generations of Barbadians. Barbadians 18 years and older are expected to gain a stake in the fund after it is established. It is envisioned that the fund will hold government assets, including on- and offshore real property, revenues from oil and gas products, and non-tangible assets such as trademarks, patents, and intellectual property. As part of the government’s pandemic response, the prime minister has signaled plans to reengage on this issue.