Offshore banking centres across Caribbean under threat

BRIDGETOWN, Barbados, October 31, 2008 – Scores of offshore banking centres across the Caribbean are facing their most serious challenge yet in the wake of the global financial meltdown. In fact, a leading financial analyst on the global recovery front is predicting that “traditional” offshore deposit-taking is going to be a dead industry in 10 years.
 
This stark reality was painted by Professor Avinash Persaud – a Barbadian based in London who has spent the last month advising a number of G7 nations in their post-crisis recovery strategies.
 
As he addressed a luncheon seminar of the Barbados International Business Association in Bridgetown this week, Professor Persaud said deposit-taking offshore banks were the ones marked for extinction as depositors repatriated their wealth to those jurisdictions that provided deposit guarantees.
 
In setting the context for the unfolding scenario, the chairman of Intelligence Capital Ltd. pointed out that the crisis has brought home the importance of the tax-payers guarantee for the banking system. But while governments guarantee deposits held in their domestic banks, they would not protect the deposits held by their tax-avoiding citizens in offshore accounts. And, Professor Persaud noted, it would be politically imprudent and financially beyond their means for Caribbean governments to protect non-nationals’ deposits held in international banks domiciled on their islands.
 
The Gresham College professor emeritus emphasised that the Barbadian offshore financial centre is not dependent on off-shore banking, but offshore asset management instead. But he argued that Barbados will need to redouble its efforts to focus on wealth management and move even further away from deposit taking.
 
Professor Persaud also warned that even in the field of asset management, low tax and loose regulations is not a sustainable strategy in the new evolving world order. Instead, he said that “right-sized regulation” and a highly skilled and intelligent work force would be the two biggest assets for countries looking to continue the survival of their offshore sectors. This provided both opportunities as well as challenges for Caribbean financial sectors. 
 
While acknowledging that the full force of the financial crisis was yet to be felt in this region, Professor Persaud said the Caribbean would be on the frontline of the unfolding economic crisis and now, while firms had the time, was the moment for them to prepare how they were going to keep afloat in the turbulent times.