Central Bank launches new guidelines in financial transparency bid

The Central Bank of Barbados has introduced new Market Conduct Guidelines aimed at enhancing transparency and fairness in the financial services industry. The guidelines, which came into effect on Friday, set minimum standards for interactions between licensed financial institutions and their clients.

Governor Dr Kevin Greenidge unveiled the new regulations on Monday at the Courtney Blackman Grand Salle of the Tom Adams Financial Centre. He emphasised their importance in maintaining consumer confidence and promoting economic growth.

He declared the aim is to not only ensure transparency, fairness, and ethical behaviour in financial services but also a consistent banking experience for all, regardless of where they choose to manage their finances.

“Market conduct really refers to the behaviour in the practices of the various financial institutions and the interactions with consumers, the public, and all the other stakeholders,” Dr Greenidge said. “It looks at issues of transparency, fairness, and ethical behaviour of institutions right here in terms of products and financial services. Guidelines, therefore, are necessary to ensure that the financial system remains stable, it remains transparent, and it remains fair for all players involved.”

The governor further pointed out the importance of the regulations for maintaining consumer confidence in financial institutions. “By issuing and the financial institutions adhering to these, it ensures that we are able to, one, provide a very transparent system, but also be fair to consumers for their confidence in our financial institutions.”

Dr Greenidge explained: “Everyone is aware of the rules of the game. Everyone is aware of what the fees are; for example, there’s a lot of public discourse early in the year about fees. A person is aware of charges and what it costs to do a financial transaction. What are your rights? What are the rights of the financial institutions? How does it conduct?”

He continued: “What about accessibility to the vulnerable groups in society, the differently abled? So those sorts of things are what we talk about when we talk about fairness and transparency. How does it impact economic growth? How do international institutions see our market? The more transparent you are, the easier it is to do business; it’s clear rules and guidelines, and so market conduct pulls all those together into a coherent, integrated structure that people can easily follow.”

Detailing the application of the guidelines to financial institutions, Dr Greenidge clarified: “There are many players in the financial system, the consumers, the financial institutions, the regulator, us . . . The guideline speaks directly to the licensee of the Central Bank, which would be the banks and the proprietary companies. And it talks about things like openness, fee setting, and fee structure.”

He added: “It talks about the display of information on products and things like that. And so it speaks directly, but why are we doing it this way? Because it has information for consumers. So consumers know, well, if I go to a financial institution, this is what I can expect, these will be charges I can expect, this is what I cannot, I should not see, and we can get into that a bit later. These are things if I’m trying to open an account, [the]  kind of time it should be looking at, when it should be asked, and those sorts of things.”

The guidelines address five key areas: bank fees and charges, accessibility, opening accounts, closing accounts, and complaints. They also offer recommendations for improving communication with customers.

Fees and charges

The guidelines require banks and finance companies to seek the Central Bank’s non-objection at least 60 days before implementing new fees or increasing existing ones. Once approved, customers must be notified 30 days in advance. Reducing fees does not require prior notice. Additionally, banks and finance companies cannot charge for electronic fund transfers or cash management transactions under $10 000 per day. All fees must be clearly displayed at physical locations and on digital platforms, ensuring transparency and ease of understanding.

Accessibility

To promote inclusivity, the guidelines mandate that physical bank locations be wheelchair accessible and navigable for the visually impaired. Digital interfaces must accommodate various disabilities. As of July 2023, all commercial banks must offer at least one no-fee account and low-fee accounts for vulnerable groups, including pensioners, minors, and students.

Opening Accounts

Financial institutions must adhere to Anti-Money Laundering and Combating the Financing of Terrorism (AML-CFT) laws, following a risk-based approach for new clients. Low-risk individuals and businesses will require less documentation than high-risk ones. Banks and finance companies must provide clear timelines and periodic updates during the account application process, aiming to decide within three to five business days. If denied, applicants have the right to a formal review.

Account Closures

When closing an account, banks and finance companies must notify customers 30 days in advance, explaining the reason and any possible preventive actions. Customers can appeal closure decisions. These procedures must comply with AML-CFT laws, which include ‘tipping off’ regulations.

Complaints

The guidelines ensure that customers have accessible, free avenues to resolve complaints. Banks and finance companies must provide detailed information on the complaint process, available both at physical locations and online. Complaints must be acknowledged within three to five business days, with a written response detailing the decision and any proposed remedies. Unresolved complaints can be referred to the Central Bank.

The new guidelines, which went into effect on Friday aim to standardise operations, ensuring a consistent and smooth banking experience while enhancing financial inclusion for all Barbadians.

Cheryl Greenidge, senior director of bank supervision noted that a number of the behaviours included in the guidelines were already being practised by several financial institutions, but the bank believed it was important to codify them to ensure Barbadians enjoy a consistent experience regardless of where they conduct their financial affairs.

In swift reaction to Monday’s announcement of the Market Conduct Guidelines, a consumer advocate endorsed the initiative. The Barbados Consumer Empowerment Network (BCEN) highlighted longstanding concerns over consumer frustrations, particularly regarding banks’ Know Your Customer (KYC) procedures.

“I want to be the first to offer my blessings on this initiative because this is something that our organisation has been talking about for a while, so kudos to the Central Bank of Barbados for our full support,” said BCEN Executive Director Maureen Holder.

The BCEN emphasised the need for banking reforms that address KYC challenges. Holder said: “The consumers suffer many indignities . . . it really has to do with some of the things I mentioned earlier, which are closing the account, changing a name, those little things, what we consider basic transactions.”

Responding to these concerns, Central Bank Governor Dr Kevin Greenidge said: “This is the start of trying to improve our market and bring greater confidence and transparency to it,” while underscoring the importance of KYC protocols in complying with international standards such as Anti Money Laundering (AML) guidelines and emphasising the need for financial institutions to verify customers’ identities and sources of funds.

The governor also introduced the concept of Electronic KYC (EKYC), envisioning a digital repository that would streamline verification processes across financial institutions. “We’re, picture this, a repository or vault . . . in cyberspace, somewhere. We have it out somewhere at the Central Bank,” Greenidge elaborated. He highlighted the potential of EKYC to enhance interoperability and reduce administrative burdens for both consumers and financial institutions.

While acknowledging the progress made with the new guidelines, Holder reiterated the BCEN’s focus on KYC improvements.

“What we would have wanted at BCEN is for them to focus more on the know-your-customer part of it because that’s where most of the frustration comes from consumers,” she said, while calling for continued dialogue and collaboration to further refine banking regulations and ensure they adequately protect consumer interests.