By MARTELLA MATTHEWS Guardian Staff Reporter martella@nasguard.com

The Bahamas will lag behind in the area of growth of funds compared to other offshore centres, if Offshore Financial Services Databook 2003 projections prove true.

The Bahamas Financial Services Board, however, while not entirely disputing the "findings", attributed some "erosion" in deposits to certain Central Bank initiatives, but, overall, The Bahamas has "continued to retain a strong market position."

Databook 2003, which is published by Research and Markets Limited, a Dublin-based firm, predicted that while all offshore centres are expected to see growth in funds, Bermuda and the British Virgin islands will be among the fastest-growing centres and the Bahamas "will lag behind the rest of the markets."

Databook 2003, claiming that 62 per cent of deposits in The Bahamas were from clients in the United States, also stated that investors' choice of offshore deposit centres was very much related to the proximity of the centre to the investor's home market.

Pressure from the Organization for Economic Co-Operation and Development (OECD) and United States regulatory scrutiny was predicted to negatively impact deposits in The Bahamas.

A strong growth in funds from the United Kingdom is expected to offset the forecasted decline in US fund investment.

The Bahamas Financial Services Board issued a response to the pronouncements made by Databook 2003 in the form of a statement on the organization's website. The BFSB stated that The Bahamas was a "strong" and "well- regarded" booking centre for US currency deposits, and it did not necessarily mean that the deposits originate from US individuals. "Generally, Bahamian financial institutions have a diversified international base of business."

Addressing the reduction of deposits, the BFSB said the decision by The Bahamas to eliminate managed banks had led to some "erosion" in deposits, but the decision was in no way related to OECD pressures, but was rather a recognition of the need to preserve the integrity of the jurisdiction. The BFSB emphasized that the Central Bank "foreshadowed" an impact on deposit base when this policy was introduced.

The BFSB maintained that: "Despite the OECD and other recent initiatives, The Bahamas and its financial institutions have continued to retain a strong market position."

Offshore Financial Services Databook 2003 focuses on the assets owned by Europeans, American and Asian investors.

The report examined 13 major centres holding offshore assets including: The Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Dublin, Guernsey, Hong Kong, Isle of Man, Jersey, Luxembourg, Netherlands Antilles, Singapore and Switzerland.

Posted Friday 12 September, 2003