Prime Minister Perry Christie speaks at the press conference yesterday. He is flanked by, from left, Bank of Bahamas Managing Director Paul McWeeney, Minister of State in the Ministry of Finance Michael Halkitis and Governor of the Central Bank Wendy Craigg. (BIS Photo)
By RASHAD ROLLE
Tribune Staff Reporter
PRIME Minister Perry Christie yesterday announced a plan to help the struggling Bank of the Bahamas by establishing Bahamas Resolve, a new state-owned and controlled company that will assume liability for $100 million of BOB’s non-performing commercial loans.
This move comes after BOB incurred losses in the past two years, with its most recent quarterly report noting that its shareholders incurred $4.172 million in “red ink”.
A new report for the latest quarter was expected to be released last night.
The government believes the establishment of Bahamas Resolve will mitigate against bad credit risks, improve the bank’s revenue prospects and enhance its shareholder value and financial condition.
No funds from the public treasury and National Insurance have been used in connection with the assignment of the loans to Bahamas Resolve, said Mr Christie.
He added that BOB is now compliant with capital and liquidity requirements of the Central Bank and international standards because of the implementation of Bahamas Resolve.
In the past, BOB has been accused of giving out multi-million dollar unsecured sums to politically-connected Progressive Liberal Party (PLP) supporters.
However, Paul McWeeney, managing director of BOB, said yesterday that none of the troubled commercial loans that will be assigned to Bahamas Resolve involve “politically exposed” persons.
“Of the loans being transferred from the Bank of the Bahamas to Resolve,” he said, “none include any loans outstanding to what I’d call politically exposed persons. The total outstanding loans of such persons constitutes a comparatively small percentage of total outstanding loans.”
Officials blamed BOB’s troubles on the 2008 recession, which caused numerous borrowers to experience difficulty repaying their loans, thereby affecting the profitability of the bank.
State Minister for Finance Michael Halkitis said that in comparison to BOB, however, Bahamas Resolve will have greater opportunities to collect payment on overdue loans by using “every commercial, financial and policy mechanism available to it.”
He added that in the event that Bahamas Resolve realises 100 per cent of the assets it targets, steps will be taken to dissolve the company.
Nonetheless, a government press release yesterday said the plan is for Bahamas Resolve to be in operation for 10 years, following which the government “will reevaluate the value it has realised from the debt portfolio, examine Resolve’s financial situation and determine a way forward.”
The statement added that the government consulted with the Opposition on the matter “in a spirit of national unity, national interest and non-partisanship”.
According to officials, directors of Bahamas Resolve will be appointed by the Ministry of Finance and within days a private accounting firm experienced in managing non-performing loan portfolios will begin managing the company.
Mr Christie said: “The government’s actions are not fundamentally dissimilar to state-led restructurings that were done or accommodated for a number of banks in the more developed economies of the world…in the wake of the 2008 recession.”
He added that BOB will also undertake restructuring actions of its own to “re-align and re-balance the bank’s business model towards more retail banking, consumer lending and e-banking products.”
To this end, Mr McWeeney said steps are already being taken to improve the bank.
“Consistent with this new effort,” he said, “the bank is piloting a placement card system for Social Services as well as the general civil service for travel purposes. Internally, important initiatives have been implemented to positively impact the culture, improve customer service and enhance governance and accountability. The bank is seeing the benefits from a revamped sales and service apparatus, a strategic separation of certain back and front office functions and a more defined organisational structure.”
Mr Christie said BOB’s Board of Directors has been directed to assess its management and cost structure, and to submit recommendations to the government concerning management and administrative reorganisation before the end of this year.