ST. JOHN’S, Antigua, CMC – The Antigua and Barbuda government says it is moving to overhaul its offshore banking sector, confirming that “some major changes are coming in that offshore sector”.
Prime Minister Gaston Browne, speaking on his weekly radio program, said his administration is moving towards “cleaning up our offshore sector” and that offshore banks operating here are going to have to “increase their minimum capital probably to about 20 million US dollars.
Prime Minister Gaston Browne (File Photo)
“Let’s get out of that sector completely because it’s not working for us. “ We have a problem now with another bank,” he said, indicating that the Venezuelan-based financial entity “ostensibly has US$1.3 billion in assets.”
“That’s the largest one…but, you know, getting verification, the FSRC (Financial Services Regulatory Commission) placed the bank into administration. In administration, you can’t find the money. So there’s some speculation that, you know, fraudulent activities are taking place there.
“So the recommendation has been for us to put the bank into liquidation. And by so doing, we know precisely what the situation is. But for years now, the FSRC has been trying to deal with that bank. It’s a Venezuelan-based bank. Most of the assets are in company accounts, I’m told. I haven’t seen the balance sheet…
“So the cost of deposits, you know, is a smaller fraction of the overall size of the bank. But that sector is just not bringing us any value, and we’ve got to get out of it definitely, and what we may do is get into wholesale banking.”
Prime Minister Browne told radio listeners that if “you have an established bank that wants to establish a branch here, or if it’s a new bank, we want to raise the capital so high that there’s no opportunity for them to misappropriate…
“ So if you have that kind of $20 million US capital, it provides a more significant buffer compared to, you know, a bank putting in three million, five million dollars, just too low.”
He said what the authorities have found over the years is that “some of those banks have turned out to be, you know, less than acceptable.
“So we’re going to have to really deal with that sector in a very serious way. Just wind all that into even the tax structure as well. Any such entity operating in that sector should pay the exact domestic tax rate. So 25 percent, no special dispensation.”
Browne said that he has already given instructions to the Legal Affairs Ministry and the FSRC to advise government on the restructuring of that sector to increase the capital requirement, ” also to change the tax structure to make sure that they pay the same 25 percent tax that the domestic market pays”.
He said this is also to ensure there’s no opportunity for basic erosion of profit shifting, in which banks try to shift their profits offshore to deprive the country where economic activity is taking place of the opportunity to tax or collect taxes.
“So some major changes are coming in that offshore sector,” he said, adding he is of the view that the European Union and others are very critical about the sector, in cases of ring-fencing and so on.
“So I don’t know what you mean by ring-fencing, and I also feel that they were exaggerating when they accused us of being facilitators of money laundering and tax evasion because the sector is so small.”