The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ $100 million rescue is “not an adverse reflection” on its management or Board, but epitomises a commercial bank “reality” that was last week reiterated by Scotiabank’s nine-digit Caribbean writedown.

Franklyn Wilson, the Arawak Homes chairman, told Tribune Business that Scotiabank’s Cdn$109 million in Caribbean loan loss provisions, coupled with the $174 million net loss unveiled by CIBC FirstCaribbean International Bank (Bahamas) earlier this year, proved Bank of the Bahamas was no isolated case.

Suggesting that more industry writedowns and provisions were to come, Mr Wilson added that Bank of the Bahamas’ effective withdrawal from commercial lending meant this nation appeared to be ‘going backwards’ on private sector access to credit.

He suggested that it was this aspect, rather than the ‘transparency’ surrounding the Bank of the Bahamas ‘rescue’ plan, that Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, should be focusing on.

However, Mr Wilson’s effective exoneration of Bank of the Bahamas’ management and Board for responsibility for the almost-$69 million in ordinary shareholder losses for the year to end-June 30 did not pass muster with the Opposition’s finance spokesman.

K P Turnquest, the FNM MP for east Grand Bahama, told Tribune Business that it “makes no sense” to keep the existing management and Board in place, especially since doing so “gives no comfort” to shareholders and depositors.

He added that events leading up to the Bahamas Resolve ‘good’ bank/’bad’ bank solution also raised questions about the “effectiveness” of financial services regulators, chiefly the Central Bank and the Securities Commission.

Many observers are likely to back Mr Turnquest over Mr Wilson, based on private views given to Tribune Business over the past week by those working in the financial services industry.

They believe actions/decisions by management and successive Boards warrant further scrutiny, in particular the activities of the latter’s Loan Committee and the risk assessment/credit underwriting policies employed by Bank of the Bahamas.

Critics, including Tribune Business columnist, Richard Coulson, have pointed also out that neither of the other two Bahamian-owned, publicly listed banks - Commonwealth Bank and Fidelity Bank (Bahamas) - have needed ‘rescuing’ by the Government.

Commonwealth Bank unveiled $12.295 million in total comprehensive income for its 2014 third quarter on Friday, and $38.243 million for the first nine months. On the same day, Fidelity Bank (Bahamas) showed $9.869 million in total comprehensive income for the nine months to end-September 2014

Still, Mr Wilson said the two Canadian banks provided the best comparison with the Bank of the Bahamas situation, adding: “There’s reason to believe we’ve not seen the end of it.

“The first point I note is this is not an adverse reflection on Mr McWeeney and his colleagues on the Board of Directors. It’s a reality that’s affecting the industry. Let’s look at the macro national interest point of view, not small talk.”

This was rebutted by Mr Turnquest, who told Tribune Business: “It’s no surprise, but incredible, that the existing management team and Board has been allowed to remain in place during this restructuring.

“It makes no sense. It brings no sense of security and comfort to shareholders or depositors.”

The Opposition finance spokesman added: “The other thing is the regulators. It brings into question the effectiveness of the regulators.

“For over a year now people have been calling for an annual general meeting (of the bank), and we’ve seen nothing from the Securities Commission or the Central Bank. They’ve been allowed to just carry on.

“It’s been a notable lapse, in my opinion, because we depend on the regulators to raise the red flag and bring all these institutions into line.”

Mr Wilson, meanwhile, said the Government, especially as 65 per cent majority owner, as well as from a public policy perspective, had little choice but to ‘rescue’ Bank of the Bahamas as the only seeming alternative was its eventual bankruptcy.

However, the Sunshine Holdings and Arawak Homes chairman said more attention should have been paid to Bank of the Bahamas’ announcement that it would “curtail” lending to businesses and the private sector.

“That’s huge for the country,” he told Tribune Business. “This, to me, is a matter of huge consequence for the business community. This is the question: To what institution, where, does the business sector go when it’s looking for a loan?”

Mr Wilson said that when he was an accountant, the likes of Citibank, Chase Manhattan, Bank of New Providence and Barclays Bank were all in the commercial lending business.

With Bank of the Bahamas’ withdrawal from this space, and both Commonwealth Bank and Fidelity Bank (Bahamas) focused on consumer lending, Mr Wilson said Bahamian businesses would have to turn to the three Canadian-owned institutions in their search for debt financing.

Such credit is the lifeblood of Bahamian businesses and the economy, financing their job-creating growth and expansion, but Bank of the Bahamas’ withdrawal means that access and capacity in this space will be further limited.

“There were at least seven, if not more, local banks that businesses could go to for a loan,” Mr Wilson said. “At least seven credible options 20-odd years ago.

“Today, we’re now down to three. That is not progress. All of us in the business community have to be concerned about the shrinking range of options available.”

While larger companies have the ability to tap the capital markets, Mr Wilson said it was small and medium-sized Bahamian businesses that would especially feel Bank of the Bahamas’ absence.

Recalling how Bank of New Providence was the banker to Deloitte when he worked there, and that Chase Manhattan provided the initial debt financing for FOCOL Holdings, Mr Wilson added: “There were seven, if more, doors that no longer exist.

“Those are doors that are now closed. There’s at least half, if not more, of the doors that were opened 25-30 years ago to businesses generally that are no longer here. That is a matter of concern.”