By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Central Bank was so concerned about the accuracy and “integrity” of Bank of the Bahamas’ regulatory reporting that it demanded Ernst & Young “validate” all materials submitted to it for 12 successive months.
The demand, which would have covered the entire financial year in which the BISX-listed institution’s shareholders suffered an almost-$69 million net loss, warned that the Central Bank was considering further “remedial actions” over what it deemed to be unsatisfactory ‘credit quality reports’.
The Central Bank’s concerns were set out in two documents sent to top Bank of the Bahamas’ executives by Abhilash Bhacech, the inspector of banks and trust companies.
The first, an August 28, 2013, e-mail sent to Bank of the Bahamas’ chief operating officer, Wayde Christie, said the Central Bank “continues to be concerned about the integrity” of its regulatory filings despite these being signed off by the BISX-listed institution’s internal audit department.
Then, in a formal letter sent to Paul McWeeney, Bank of the Bahamas’ managing director, on September 13, 2013, Mr Bhacech warned that late/inaccurate regulatory filings would soon be subject to financial penalties under upcoming regulations.
Mr McWeeney told Tribune Business in response that the BISX-listed institution and Central Bank had “moved beyond” these issues and that they were in “the past”.
He added that this newspaper had seen “only one side” of the discussions between the Central Bank and Bank of the Bahamas, and that the latter had “resolved many more” issues that had gone unreported.
Mr McWeeney, though, said he was prevented from going into detail by confidentiality protocols intended to protect the banking system’s integrity, and discussions between the Central Bank and its licensees.
Still, the documents obtained by Tribune Business shed further light on ‘behind the scenes’ events, particularly the regulatory interactions, that culminated in the $100 million, government-led rescue of Bank of the Bahamas in late October 2014.
Mr Bhacech’s e-mail, referring to a phone conversation the previous day between Central Bank and Bank of the Bahamas executives, makes clear the regulator’s concerns.
It explains that the teleconference concerned “apparent discrepancies” in Bank of the Bahamas’ monthly credit quality reports, which deal with the strength - and movements in - banks’ loan portfolios.
The discrepancies, according to Mr Bhacech, related “in particular” to “large movements in commercial loans, past due commercial loans and total outstanding restructured loans”.
The Inspector said Bank of the Bahamas had been put on notice about how important these credit quality reports were by Central Bank governor Wendy Craigg in her December 13, 2012, letter that was previously revealed by this newspaper.
Mr Bhacech, alarmingly, then suggested that the Central Bank did not believe the authentications from Bank of the Bahamas’ internal audit department, confirming its reports were accurate.
“Despite attestations from your Internal Audit Department, we continue to be concerned about the integrity of Bank of the Bahamas’ regulatory filings in light of our discussions yesterday with yourself, wherein it was confirmed that there were errors in Bank of the Bahamas’ monthly submission for July,” Mr Bhacech wrote.
“We believe that these recent errors suggest that information received from Bank of the Bahamas for the past several reporting periods was inaccurate. Further, the Internal Audit review and attestations have failed to identify these errors prior to the filings.”
He added: “We require immediate documented explanation from Bank of the Bahamas clarifying the nature, cause and extent of these errors.
“Further, we need Bank of the Bahamas to resolve the ongoing problem of inaccurate reporting through refiling of accurate information no later than the end of September 6, 2013, along with ‘unqualified’ Internal Audit attestations.”
The response was clearly less than satisfactory to the Central Bank, for Mr Bhacech wrote to Mr McWeeney some 16 days later to reemphasise the regulatory’s concerns over accuracy and the late filing of its revised June 2013 credit quality report.
“The Central Bank requires, with immediate effect, that the services of the firm’s external auditor, Ernst & Young, be engaged to validate all regulatory reports submitted to the Bank,” Mr Bhacech demanded.
“Please note that Ernst & Young’s validation is also required for re-submission of the July 2013 report made earlier, and will remain in force until you achieve 12 consecutive months of timely and accurate reporting.”
Warning that he could not “underscore” the importance of timely and accurate regulatory reports, Mr Bhacech added: “You should be aware that additional supervisory remedial actions are currently under consideration to ensure satisfactory reporting commensurate with industry standards and the Central Bank’s expectations.
“We would also like to remind you that, with the anticipated implementation of the Administrative Monetary Penalties Regulations, such late and/or erroneous filings will be subject to monetary penalties.”
Mr McWeeney, when contacted by Tribune Business, said “systems issues” had complicated Bank of the Bahamas’ regulatory reporting, as processes were more “manual oriented than they should be”.
“We’re working through those issues,” he added, suggesting that Tribune Business had seen “one side of the story” and not the extent of discussions between the Central Bank and Bank of the Bahamas.
Pledging that there “is a lot more to it”, Mr McWeeney said the bank’s Internal Audit department “validates” all credit quality reports.
When it was pointed out to him that the Central Bank had expressed concern about the accuracy of Internal Audit’s sign-off, Mr McWeeney replied: “We’ve moved beyond that with the Central Bank. That’s in the past.
“We’re moving forward. We have resolved quite a lot of stuff that you have not seen.”
Bank of the Bahamas’ regulatory interactions with the Central Bank were among the questions raised by minority shareholders at Thursday’s heated annual general meeting (AGM).
Investors who were present said they received no clear answers from Bank of the Bahamas management and Board on these issues, with the letters received from the Central Bank described as a “normal course of business” that could not be discussed,
Dionisio D’Aguilar, one of the minority shareholders present, told Tribune Business: “They weren’t going to let you open that can of worms.”
Comments
Sickened 9 years, 4 months ago
I would like to know who represented the government at the AGM? Was that representative there in person or was a proxy signed allowing one of the board members to vote on the government's behalf. Did only minor shareholders raise any concerns at the AGM? If it wouldn't be a COMPLETE waste of money I would be tempted to buy a BoB share just so I can attend these AGM's.
mangogirl01 9 years, 4 months ago
No government rep. was there in person, a signed proxy representing the Government was used. Yes, only the minority shareholders raised concern and it got contentious when Mr. Darron Cash when to the mic with his list of questions, he was consistent in getting answers to his questions but it didn't make a difference as the Chairman told him he was not answering them! As it is a public trading company, you do not need to have shares to attend the AGM.
mangogirl01 9 years, 4 months ago
The Managing Director gave a 'sugar-honey-ice-tea' coated speech on what happened with the Bank! If you don't laugh you'll cry!
proudloudandfnm 9 years, 4 months ago
Amazing. This bank is too dirty man. And we are being forced to pay VAT....
Bahamians really need to wake up man.
Board has been re-elected. McSweeney is still Managing Director. And our idiot government decided we needed yet another useless government corporation to be set up to deal with this secret filled bank's bad debt.
You cannot make this stuff up.
TalRussell 9 years, 4 months ago
Tribune reporter has but one questions ask BOB's "reelected" board of directors? Such a simple but important question no reporter seems ready ask? Why not? When it was pointed out to him that the Central Bank had expressed concern about the accuracy of Internal Audit’s sign-off, Comrade McWeeney replied: We’ve moved beyond that with the Central Bank. That’s in the past. We’re moving forward. We have resolved quite a lot of stuff that "you have not seen.” Yeah not seen - like a list of the names who those bad loans were made to? However, can McWeeey assure the public that had there been no intervention by the taxpayers $100 million bad loans guarantee, that the entire viability of the BOB he heads, could have even continued daily operations?
TheMadHatter 9 years, 4 months ago
Notice how the Central Bank had no authority in the matter. All they could do is keep writing letters saying "We are concerned that...." or "We write to remind you that ..."
They can do nothing with the banks. Now if you or I are found with, say, $2000 in US currency and cannot show our receipt where we got it from the bank using our plane ticket etc - we can be charged. It seldom happens - but it CAN happen. You and I can't wire transfer money and then say "oops, I forgot to fill out the application form". We have to fill it out first.
The Central Bank should have had the authority to penalize them in incremental steps until they complied... such as : You will now comply with the following. ONE case of non-compiance with any of the above will result in the police locking your doors and turning off your phones and internet for ONE month.
You are now restricted from making loans either personal or business or otherwise in any amount exceeding $300,000
You are now restricted from making any additional loans or any type of credit instrument in any amount to anyone or any entity that currently has a loan with you - or has any type of credit instrument.
You are now restricted from open any new accounts of any type.
You are now restricted from conducting business on Wednesdays either withing the physical branches or by phone, e-mail, telefax, or in any manner whatsoever - this includes the ABM/ATM machines.
You are now restricted from conducting business or Wednesdays and Thursdays ....(same as above)
You are now restricted from conducting business on Mondays, Wednesdays and Thursdays ... (same as above).
keep adding days until all seven days are covered.
Chances are they will comply somewhere along the steps I've outlined above if they are added - one new step added, say, every two weeks - until compliance is obtained.
Note too that a big part of the problem with BOB started when they decided to get rid of their locally run and maintained AS/400 IBM system and move their processing to India and then from india to Europe.
ThisIsOurs 9 years, 4 months ago
LOL, I guess point six would solve all concerns about BOB's operation
TheMadHatter 9 years, 4 months ago
Yes - but remember I'm suggesting not to add all of these points at once. But to start with number one, and then wait 2 or 3 weeks before adding the next point, and then wait again before the next point - etc.
SP 9 years, 4 months ago
.. FBI Exposes PLP And FNM Use Of "Consultants" To Facilitate Bribery And Corruption ..
http://www.topix.com/forum/world/the-...">http://www.topix.com/forum/world/the-...
This is the main reason our country is in a mess............. PIRATES AT THE HELM !
.............. Mr. Greenslade..........Do your job and send these BASTARDS TO JAIL ..........
Sickened 9 years, 4 months ago
I imagine that the Central Bank has the authority to keep an audit team in BoB say for 3 months in order to review every transaction and loan approval? This expense would of course be paid by BoB. Why hasn't Central Bank done this? The Central Bank also needs to review E&Y's policies and procedures as they relate to their audit of BoB and perhaps restrict their audit licence until they can prove that they were not involved in facilitating the mis-reporting.
Well_mudda_take_sic 9 years, 3 months ago
When is our Perry Christie led government, as the majority owner of BOB, going to fire this jack arse Paul McWeeney?!! Who in their right mind, apart from the numbers bosses like Craig Flowers, would put money in this bank as long as it is headed by Richard Demeritte and Paul McWeeney?!!!!! Just about any professional public accountant can easily demonstrate (and also easily testify under oath) that BOB's annual audited financial statements for the past three years were deliberately materially misstated with the intention of misleading both stakeholders and regulators alike and that this was done with the full knowledge and blessing of Demeritte and McWeeney. As such, these two individuals are guilty of having caused and allowed a publicly owned enterprise to engage in serious material fraudulent financial reporting which is a crime of the highest order warranting due prosecution of all those directly involved.
Reality_Check 9 years, 3 months ago
Correspondence from CBB/Wendy Craigg to BOB/McWeeney clearly shows CBB has already accused (and demonstrated beyond reasonable doubt) that BOB's management team prepared materially misstated financial statements for the last three years. The fact that Ernst & Young (E&Y), as BOB's external auditors, failed to detect and mention the material misstatements in their audit reports is a separate matter for which E&Y itself should be held accountable by CBB and the stakeholders in BOB. Mudda_sic is spot on in his observations and remarks.
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