Pictured at the Press Conference on Bank of The Bahamas today at the Office of the Prime Minister are, from left: Bank of Bahamas Managing Director Paul McWeeney, Minister of State in the Ministry of Finance, the Hon. Michael Halkitis, Prime Minister the Rt. Hon. Perry G. Christie, and Governor of the Central Bank, Wendy Craigg.
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Nassau, New Providence - Statement by The Right Hon. Perry G. Christie MP, Prime Minister and Minister of Finance:
For 25 years, successive
governments have worked hard to transform Bank of The Bahamas from a foreign owned
entity into a fully Bahamian owned clearing bank with a unique mix of public
and private sector ownership, offering to the public a wide range of banking
services in New Providence, Grand Bahama and various Family Islands where other
clearing banks have historically shown little interest in going.
Today:
·
BOB is
100% Bahamian-owned : 65% by the Government of The Bahamas, with the remaining
35% being widely held by some 3,500 Bahamian shareholders.
·
BOB now
has total assets of $771 million dollars, compared with only $93 million when
the Government acquired ownership of the bank from the Bank of Montreal 25
years ago in 1988.
·
BOB has
approximately 40,000 depositors today with deposits totalling $679 million
dollars.
·
BOB has
total loan assets of approximately $650 million dollars
·
BOB
operates through 14 branches in The Bahamas
·
BOB
employs more than 350 Bahamians.
With all that successive
governments have done over the years as majority shareholders of the bank, the
guiding resolve has remained the same:
·
to
maintain the safety and security of customer deposits at all times;
·
to
ensure that the bank is operated in accordance with regulatory norms imposed by
the Central Bank of The Bahamas and industry “best practices” ;
·
to
ensure that the bank delivers its services to its customers at a world-class
standard and in a way that is relevant and responsive to the needs of Bahamians
and their national economy ;and
·
to
ensure that at all times the bank is backed by what is colloquially referred to
as the “full, faith and credit” of the government as the majority shareholder,
while at the same time preserving the integrity of the bank through a policy on
non-interference by the government in day-to-day management and credit
decision-making.
Although between 1993 and 2012,
BOB enjoyed an unbroken record of profitability, it has, in common with nearly
all other clearing banks in The Bahamas, experienced reversals either resulting
from or exacerbated by the recent global recession and, in particular, the last
U.S. recession.
In the case of the Bank of The
Bahamas, the Central Bank, under the leadership of Governor Wendy Craigg, has
carefully monitored BOB with particular reference to the risks posed by BOB’s
portfolio of non-performing commercial loans.
As part of this regulatory oversight, the Central Bank has engaged the
Ministry of Finance in constructive dialogue on remediation strategies. Out of this has developed a specific plan of
action.
I am therefore pleased to
announce this plan today. Here is how it will work:
The Ministry of Finance has
established a new Bahamian company, Bahamas Resolve Ltd (“Resolve”) which is
wholly-owned and wholly controlled by the Government of The Bahamas. Resolve has taken over B$100M in troubled
commercial loans from Bank of The Bahamas, thereby removing this risk from
BOB’s books. In so doing, the Bank’s revenue prospects will be immediately and
significantly improved. At the same
time, shareholder value and the Bank’s overall financial condition will be
enhanced as well. It will also allow
Bank of The Bahamas to return to profitability in the near future and will
restore full compliance with Central Bank and international regulatory
standards for capital adequacy.
I should like to emphasize,
firstly, that no public treasury or National Insurance funds have been
disbursed in connection with the assignment of these loans from BOB to
Resolve. However, liability for these
debts has been transferred to Resolve along with the benefit of the loans and
the underlying security. And as the new
owner of the transferred loans, Resolve will be putting special mechanisms in
place to assist in the collection of the overdue loans.
Secondly, I should also like to
emphasize that this transaction, under which $100 million in commercial loan
debt has been transferred from BOB to Resolve, was developed in close
consultation with BOB’s legal advisors in this matter, Higgs & Johnson, and
BOB’s external auditors, Ernst & Young, both of whom have provided
affirmative opinions on the transaction.
And thirdly, I should also like
to emphasize that this kind of transaction is not fundamentally dissimilar to
state-led re-structurings that were done or accommodated for a number of banks
in the more developed economies of the world, including the U.S., in the wake
of the 2008 recession.
In addition to what I have just
outlined, I wish to make it known that the Bahamas Government, consistently
with its 65% stake in BOB, will be pursuing new initiatives designed to steer
more public sector business and public employee credit demand towards the Bank
of The Bahamas. In doing so, however,
the Government will, of course, be mindful of its obligation to maintain a fair
and competitive commercial environment for all banks in The Bahamas. I have therefore instructed the Ministry of
Finance to determine the best course of action for achieving these objectives
on a correctly balanced basis.
In conjunction with the
elements of the plan that I have just outlined, the Bank of The Bahamas will
also undertake re-structuring action of its own to re-align and re-balance the
bank’s business model towards more retail banking, consumer lending and
e-banking products.
BOB’s Board of Directors has
also been directed to assess its management and cost structure, and to submit
recommendations to the Government, as the majority shareholder, for management
and administrative re-organization, before the end of 2014.
Together, the plan and measures
that I have outlined will help ensure the sustained stability and future growth
and profitability of BOB. The Bank of
The Bahamas bank has a great and prosperous future ahead of it.