Deloitte to collect $100m in ‘bad’ BOB commercial loans

As of Wednesday, December 10, 2014

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Government yesterday confirmed Tribune Business’s disclosure earlier this week that Deloitte & Touche has been selected as the accounting firm charged with collecting on $100 worth of ‘bad’ commercial loans formerly belonging to Bank of the Bahamas.

Michael Halkitis, minister of state for finance, also confirmed ex- finance ministyer for former Central Bank governor, James Smith, would head Bahamas Resolve’s Board of Directors.

The Government, Bank of the Bahamas’ 65 per cent majority shareholder, previously unveiled the plans to strengthen Bank of the Bahamas through the creation of a new entity, Bahamas Resolve, which has taken the $100 million in troubled loan assets.

“The collection and management of the Resolve portfolio is being contracted to the accounting firm Deloitte and Touche. Resolve itself will have in place a Board of Directors headed by James Smith, former Central Bank governor and former minister of state for finance,” Mr Halkitis told Parliament yesterday.

“We are confident that this combination of the Board and portfolio manager will allow Resolve to maximise its collection on the portfolio of assets over which it has taken charge.”

He added: “The end result of the economic downtown has been that most of our commercial banks, faced with the nature of arrears, have had to make significant provisions for loans losses, in some cases having a negative impact on their overall profitability when the adjustments are made.”It was similar for the Bank of the Bahamas, in fact, to the extent that the increase in loan loss provisions placed the bank in the position of having negative retained earnings at the end of its financial year ended June 2014.”

To counter this, Mr Halkitis said the Government placed $43 million in deposits with the bank between June and October 2014. It also paid the $1.1 million dividend due to Bank of the Bahamas’ preference shareholders in July.

A notice issued by the bank makes clear there is no obligation to repay the $1.1 million to the Government, leaving the Bahamian taxpayer on the hook once again. The dividend payment is effectively a wealth transfer from the taxpayer to the preference shareholders.

“This approach was also endorsed by the Central Bank of the Bahamas in view of the recapitalisation needs, which were evident at the time. As payment to the bank, Resolve issued the bank with a $100 million promissory note,:” Mr Halkitis said of the ultimate bailout plan.

“The promissory note is also backed by a Letter of Comfort by the Government,” he added. “With this asset exchange, the Bank of the Bahamas has been able to reverse $49 million in loan loss provisions. Its capital ratios at the end of October were therefore within the regulatory limits established by the Central Bank.”

mangogirl01 9 years, 4 months ago

This does not bode well at all - Deloitte & Touche were the Bank's former auditors, for years, before Ernst & Young and are too familiar with executive management. Nothing will come of this!

GrassRoot 9 years, 4 months ago

I am shocked. the Government has money to place into a black hole?

watcher 9 years, 4 months ago

It is not "Government" but us, the taxpayers, who are burdened with this black hole. Do you honestly think that parliamentarians and their cronies will pay back their loans ?

TalRussell 9 years, 4 months ago

Comrades remember when Hubert regime retained Comrade Bran's law Firm collect millions dollars outstanding? Go ask Bran and Marsh Harbour's Edison, exactly how many dollars were ever collected? The law Firm were clearly instructed, OK here's da deal. You can write all liters you want asking for repayments monies owing to red government - but you are NOT authorized sue anyone, unless we the government gives you green light.

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Well_mudda_take_sic 9 years, 4 months ago

Ray Winder (Deloitte & Touche), Jame Smith and the other Board members of Bahamas Resolve have only one mandate: TO COVER UP THE FUNDS STOLEN BY 13 POLITICALLY CONNECTED BORROWERS BY WAY OF FRAUDULENT LENDING PRACTICES AT BANK OF THE BAHAMAS! Sadly, Christie himself, as Minister of Finance, had a hand in blessing certain of the "loans" made by BOB to the 13 politically connected borrowers, which "loans" were never intended to be repaid from the get go. WINDER AND SMITH ARE TYPICAL CONFLICTED TRUSTED PUPPETS OF CHRISTIE WHO WILL NO DOUBT EACH BE PAID HANDSOMELY FROM THE PUBLIC PURSE (OUR MONEY!) FOR KEEPING US (THE BAHAMIAN PEOPLE) IN THE DARK!!!!

Reality_Check 9 years, 4 months ago

As previously reported in the Tribune, Wendy Craigg (Governor of The Central Bank) is essentially on record in correspondence exchanged with Bank of The Bahamas (BOB) of accusing BOB's managing director (Paul McWeeney) and Chairman (Richard Demeritte), and others, of having engaged in fraudulent financial reporting to all of BOB's stakeholders and regulators, not to mention their grave misconduct in failing to adhere to well established banking norms and known requirements imposed by The Central Bank as BOB's primary regulator. Yet, the Bank Supervision Department of The Central Bank and Wendy Craigg have thus far failed to declare McWeeney and Demeritte to be persons unfit to serve as a director of any financial institution. One can only imagine the message this sends to other bankers in our financial services sector who may be contemplating "crossing the line" and causing material financial harm to their customers and other stakeholders, not to mention harm to the reputation of the Bahamas as an offshore financial centre. Wendy Craigg acted nearly 3 years too late in the case of BOB and continues to fail in the timely discharge of her duties by allowing both McWeeney and Demeritte to remain at BOB. Wendy Craigg needs to think much more about her statutory duties and personal legacy and much less about what Christie may want or desire!

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