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Bob Faces Forensic Audit With Gov't 'Open To A Sale'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government is planning a forensic audit into Bank of the Bahamas' lending practices, the Deputy Prime Minister yesterday saying the Government is "open" to selling the troubled lender.

K P Turnquest, kicking-off the mid-year Budget debate, told the House of Assembly that the Minnis administration planned to probe both the 'toxic' loans transferred off the bank's balance sheet as well as credit that had been 'written off'.

He argued that political interference, coupled with shoddy lending practices, had been key factors in the demise of the stricken BISX-listed institution which is only now showing signs of returning to profitability after two taxpayer-funded 'bail outs' and a rights issue that have cost the Government a combined $300 million-plus.'

Mr Turnquest said winding-up Bank of the Bahamas, as many have called for, would be more costly for the Government than continuing to 'prop up' the institution and hope it returns to profitability under the new Board.

Addressing the extra $100 million borrowing required to redeem the bonds injected into Bank of the Bahamas' balance sheet to replace the 'toxic' credit transferred to the Bahamas Resolve 'bail out' vehicle, Mr Turnquest warned that the Government was not done investigating the causes of the bank's demise.

He argued that the bank's financial difficulties, which saw it rack up around $150 million in losses over a five-year period, were heavily linked to "the very large loans that it extended to certain persons with appropriate connections, or so-called politically exposed persons (PEPS), without doing the due diligence or securing the necessary collateral that prudential" lenders do.

Mr Turnquest specifically mentioned one $28 million loan, which is thought to refer to former Cabinet minister and MP, Leslie Miller, although there is nothing currently to suggest he has defaulted.

The Deputy Prime Minister, though, said multi-million dollar loans to so-called PEPS were involved, and he warned: "Our investigation into this travesty is far from complete, and we will have more to say in due course.

"We are commencing a forensic audit not only of the loans transferred to Resolve, but those loans written off. We're borrowing to replace the $69 million paid from recurrent revenues to pay the promissory notes of Resolve."

The $100 million borrowing will redeem the 'promissory notes' injected into Bank of the Bahamas in the first bail-out transaction. The second bail-out, which took place last summer, saw Bank of the Bahamas take possession of a further $167.7 million in promissory notes, which Mr Turnquest said will also have to be redeemed by the taxpayer/government at a future date.

"The Government is of the view Bank of the Bahamas can be returned to profitability under the new Board of Directors as it implements its transformation strategy," the Deputy Prime Minister said.

He added that the Minnis administration's primary goals in dealing with the BISX-listed institution are to protect depositors, preserve jobs for its several hundred staff, and prevent its problems from becoming a systemic risk for the wider banking sector and economy.

"Some people say we should sell the bank, and we are open to such a move," Mr Turnquest said, "and some people say shut the bank down. We went through this analysis, and the reality is it would cost more to shut it down than support it."

He emphasised that the Government was determined to "keep politics out" of how Bank of the Bahamas is run, and Board and management decisions. However, the Deputy Prime Minister confirmed that the bank, which is around 82 per cent owned by the Government, had been asked to explore replacing Royal Bank of Canada's presence in Andros and Long Island.

"We have asked Bank of the Bahamas to look into those markets to see if they can provide services," Mr Turnquest said. "They've come back with a proposition, and we have to see how far we want to go in supporting that" from the Government side.

This implies that Bank of the Bahamas has requested taxpayer support to establish branches in both islands, recognising they are potential loss-makers due to the relatively small populations and customer bases.

"We do not want it to go into a jurisdiction where it cannot support itself," Mr Turnquest said. "Our intention is that if Bank of the Bahamas cannot do it, we will find a way for some private sector entity to go into those markets and provide that service.

"We cannot leave those communities unbanked. Something has to happen. If Bank of the Bahamas cannot rationalise its costs, we're going to have to engage a private sector entity to go in there. We're working through the dynamics."

Mr Turnquest added that the Government had urged Bahamas Resolve to "quicken its pace" in selling-off collateral assets that secured the former Bank of the Bahamas' 'toxic' credit, thus recovering funds for the Bahamian taxpayer.

Comments

bogart 3 months, 2 weeks ago

......even da govt is planning a forensic audit!!! Tired of taxpayers funding without investigations accountability!!

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John 3 months, 2 weeks ago

BoB has proven that it can be very profitable. And even with the changing banking market, where there is more dependence on technology and less human resource input, BoB can still adapt and remain very successful,even while maintaining some of the markets abandoned by RBC and other competing banks. The Biggest challenge with Bob is political interference, which also drives down consumer and investor confidence. If this government can enter closed ended agreements with foreigners that allow them no exit on behalf of the Bahamian people,surely they can fix the regulations around BoB to avoid political interference.

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DWW 3 months, 2 weeks ago

thanks for hte laugh dude

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ohdrap4 3 months, 2 weeks ago

John imbibes and the writes post while listening to innagadadavida.

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DWW 3 months, 2 weeks ago

about effin time. governments have absolutely no business in banking in a democracy.

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John 3 months, 2 weeks ago

Y’all racist anyways. Trying to sink this economy with y’all negative talks.

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bogart 3 months, 2 weeks ago

See Tribune "FNM deputy: Governance concerns over BoB web shop deposit acceptance. Tuesday, March 17, 2015 ..."In this regard, it must be a particularly tight rppe for the Government to explain to the Central Bank, OECD and the other international agencies how money gained from a previously unregulated environment can be made clean overnight by legislation alone." ....... The majority of the Bahamians VOTED NO to the Referendum on approving web shop gambling as God fearing citizens with deepest respect and honour for Our Almighty Lord and Savioir Jesus Christ....... And the governing party went against the democratically held Referandum. voting NO...Many of us stood in line in Polling stations at Church halls looking at the Cross of Our Lord...... under which persons were pulling straws for his garment and voted NO....noone is mightier than Our Almighty Lord and Saviour.

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Well_mudda_take_sic 3 months, 2 weeks ago

Turnquest is an outright liar. To date more than $450 million (not $300 million) of Bahamian taxpayers' funds and National insurance contributors' funds have been injected into BoB in one form or another in a futile effort to try keep it afloat. And as for the government selling its now bloated 82% equity stake in BoB (which may just as well be 100%), well most of us know that only the numbers bosses or the Greek would have any interest in owning BoB with the hope of furthering their own villainous objectives.

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Reality_Check 3 months, 1 week ago

You're absolutely right about the $450 million if you count:

1) National Insurance Board cash invested in BoB as additional capital to support BoB's losses on fraudulent lending activity involving PLP and FNM politicians and their cronies;

2) Taxpayer (Government) guarantees and cash injections plowed into BoB by way of Bahamas Resolve for the same reason noted in 1) above; and

3) Dividend payments made on a gratis basis by Taxpayers (Government) to BoB's preferred shareholders because of BoB's insolvency.

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sheeprunner12 3 months, 2 weeks ago

Who are the main shareholders in BOB other than the Government 65%?????? ....... How many of these shareholders are PEPs????????? ............Who are the main delinquent account holders at BOB????? ......... How many of these PEPs have held BOB Board positions????????? ........Is there a PEP and Resolve connection??????? .......... Ok, go ahead and audit BOB.

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Reality_Check 3 months, 2 weeks ago

BoB needs to be shut down, not audited yet again by another set of auditors. And Turnquest and Minnis alike need to have their heads examined for having decided to keep BoB's doors open rather than putting it in liquidation immediately after assuming office in May of last year. Minnis must stop kowtowing to the web shop thugs who now see BoB as their bank of choice for laundering their ill gotten gains.

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