When choosing a country in which to conduct International Business, most experienced decision-makers know that the driving factor isn’t as simple as choosing the country with the lowest offshore tax rate. The decision involves a complex set of considerations such as which jurisdiction has the depth of professional talent to support the business’ needs, where can expatriate employees and their families reliably and safely enjoy a high quality of life, and what is the level and stability of government commitment to the International Business sector? These are but a few examples of the criteria, which help to position Barbados as a preferred choice for International Business.
One area where Barbados shines above many other jurisdictions is in the size and scope of its financial institutions. In any jurisdiction focused on International Business, a crop of small and highly specialized service providers will establish themselves in that space to service the needs of the sector’s clients, and Barbados is not unique in that regard. Where Barbados differs however, is that the island, despite its small geography, has been selected by many large financial services institutions as a hub for their business in the region. This has led to the building of broad and deep financial services capabilities right on island, which allow International Business clients to leverage multiple capabilities within a single institution to fulfil all their financial needs. To put it simply, Barbados can be your one-stop financial shop.
A powerful emerging partnership is that between Commercial Banking and Wealth Management teams within the same financial institution. On the surface these two teams have little in common – one is focused on meeting the traditional banking needs of companies including demand deposits, cash management, merchant services and credit; the other primarily focused on providing investment management solutions and wealth structures to grow and protect their client’s assets. Given the differences in focus, many International Business Companies (IBCs) fail to see the synergies that could exist between these seemingly divergent needs, and often therefore choose two separate institutions to service them in each category. Peel back the surface though, and IBCs will discover that the synergies do exist and that sourcing these services within the same institution can be used to their advantage.
As an example of this, consider the case of a Captive Insurance company, “New Captive Life” which is going through the paces of setting up in Barbados. As a starting step, New Captive identifies a commercial bank where they can establish business deposit accounts. As is common, New Captive is also seeking support from the bank in obtaining a Letter of Credit (LC), which will serve to capitalize their offshore business. In almost every instance, the Letter of Credit will require security in the form of cash held at the same financial institution. As a result, before the Letter of Credit takes effect, New Captive Life finds itself faced with the unappetizing prospect of holding a substantial sum in cash in its Barbados commercial accounts which are either non-interest- bearing or very low yield.
To solve the dilemma, the proactive Commercial Banking Manager suggests to New Captive’s management that they meet with the Bank’s wealth management team to explore other alternatives to cash deposits for security. Knowing and understanding the terms of the Letter of Credit, the Wealth Management advisor is able to propose to Captive’s Management an offshore portfolio of near-cash, low-risk securities which is projected to yield a few hundred basis points above that of the original cash deposit. Importantly, by holding this portfolio in- house, New Captive can pledge the portfolio against the LC and still qualify as having provided adequate security to the bank. Excess investment returns can then be redeployed or repatriated.
Other types of IBCs can also leverage the broad scope of Barbados’ financial providers. For an IBC with a business that necessitates the presence of senior executives and a larger staff (e.g. Information Communication & Technology sector or Manufacturing companies), they can take comfort that both the commercial and personal needs of the business and its staff can be taken care of through a relationship with one financial provider. In Barbados, our larger institutions are able to offer IBC clients everything from Private Banking Services for local or offshore High Net Worth Executives/Owners to basic savings accounts for junior local staff. Through sophisticated cash management platforms available to IBCs in Barbados, IBCs will discover that they are able to manage functions such as payroll and benefits distribution to employees in a seamless manner.
The bottom line is that the greater scope offered by Barbados’ financial institutions allows IBC Clients to save both money and time in conducting their financial affairs on island. Come to Barbados, and discover what’s possible.
