Banking started in the Bahamas in 1837, when the first commercial bank opened in New Providence. The Central Bank of the Bahamas, established in 1973, is the central issuing and regulatory authority. Funds for local development are made available through the Bahamas Development Bank.
Low taxation and lenient regulations have encouraged the establishment of about 420 financial institutions in the country in 2000, half of which operate offshore banks, dealing exclusively with nonresidents. The banking sector accounts for more than 20% of GDP. Many of the loans of domestic banks are denominated in foreign currency. Major Bahamian banking institutions include Bank of the Bahamas Limited, Barclay's Bank, British-American Bank, Canadian Imperial Bank of Commerce (CIBC), Citibank, Commonwealth Bank, and the Royal Bank of Canada. Anti-money laundering acts have provided for the security of the banking sector.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $767.0 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $3.6 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 5.75%.
The Bahamas International Securities Exchange (BISX) opened in 2000. It opened in two phases; domestic stocks (from about 20 companies listing an estimated $30 billion in shares) followed by international offerings. In April 2001 the BISX launched a mutual fund listing facility. In 2003 there were 17 public companies listed on the exchange.