The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE DNA’s leader says there is “no doubt” that web shop industry players may be interested in acquiring Bank of the Bahamas, although such a move would not sit well with the global financial services industry and its regulators.

Branville McCartney told Tribune Business he felt there were “no if’s, and’s and but’s” about the “possibility” that the web shop industry, and the Government, may have considered such a deal for the troubled BISX-listed institution.

While agreeing that the Government needed to get out of owning a commercial bank, the Democratic National Alliance’s (DNA) leader hinted that such a deal might prove especially valuable if the new Gaming Act left the now-legalised web shop industry back “at square one”.

This, Mr McCartney said, was because there had still been no confirmation from the Bahamian commercial banking industry as to it would accept web shop deposits - something that would render the Act “ineffectual”.

“There is a possibility, no doubt about that,” the DNA leader told Tribune Business, when asked whether he felt the web shop industry might be interested in acquiring the Government’s 65 per cent majority equity stake in Bank of the Bahamas.

“I’m sure they will have discussed that, along with the Prime Minister. I’m sure it’s being considered, no “no if’s, and’s and but’s about it.”

Several observers have quietly suggested that there may be a convergence of interest between the web shop industry, soon to be legalised and regulated, and the Government over recently ’rescued’ Bank of the Bahamas.

The web shop industry, and its main investors/companies, would be among the few Bahamian groups with the ‘deep pockets’ to both acquire Bank of the Bahamas and recapitalise it via an injection of equity.

And, with virtually all other commercial banks having indicated they will either refuse, or are extremely reluctant, to accept deposits from even a legalised web shop industry, a commercial bank would be especially handy in recycling the millions of dollars generated by the sector daily.

The web shop industry would also be able to boost Bank of the Bahamas’ deposit base, and in turn available assets for lending, to the tune of millions as well. This would repair the ‘hole’ caused by over $100 million private sector deposits fleeing Bank of the Bahamas in its 2014 financial year, and reduce the need for the Government to send its deposits there.

A ‘web shop’ industry acquisition of Bank of the Bahamas is thus not so far-fetched at it may seem, given the sector’s existing unregulated lending activities, which are almost akin to a parallel banking system.

And sector players have already shown interest in banking assets, the liquidator’s report for Turks & Caicos-based TCI Bank revealing that FML chief, Craig Flowers, had several years ago, looked at acquiring the bankrupt institution. Acquiring an existing bank would be easier than establishing one from scratch.

From the Government’s perspective, selling its equity interest in Bank of the Bahamas would rescue it, and the Bahamian taxpayer, from existing - and potential future - exposure to the bank’s ‘bad loans’, and eliminate any need to support the institution.

However, any acquisition of Bank of the Bahamas - by web shop industry operators or other purchasers - would have to overcome significant obstacles, simply because it is now much harder to obtain a banking and trust company licence in the Bahamas.

A major hurdle would be the need to obtain Central Bank of the Bahamas approval, with the regulator not thought to be a numbers industry fan, and a zealous guardian of compliance with international standards.

Talking of which, Mr McCartney said of any web shop purchase of Bank of the Bahamas: “The international financial community will not look well on that.”

And the DNA leader added that the Government had yet to tell the Bahamian people whether the Gaming Act would achieve one of its main purposes - ensuring that the web shop industry’s monies would be accepted by Bahamian commercial banks, by virtue of it being legalised and regulated.

“They could not put their monies in the bank before. Do you think they would buy a bank?” asked Mr McCartney.

“We still don’t know if, after passage of the Gaming Bill, the banks will accept their monies. The Government has failed to come back to the Bahamian people and tell us whether or not, through the passage of this Act, the banks will accept their money.”

A ‘negative’ answer on this issue would leave today’s unregulated parallel banking system still in existence.

Mr McCartney added: “As it stands now, the introduction of the Gaming Bill, in terms of the legalisation of the business of web shops, seems to be ineffectual unless we have confirmation from the banks.

“Because of the reluctance of the banks to take their deposits, where are they going to put their money? You are back to square one.”

The DNA leader, meanwhile, said the party had its concerns over the current Bank of the Bahamas ‘rescue’ plan, involving the ‘bad loans for bonds swap’ with the Government-owned special purpose vehicle (SPV), Bahamas Resolve.

Mr McCartney said a key issue was whether Bahamas Resolve had been properly licensed to legally carry out its mandate, which is collecting on the 13 ‘bad’ commercial loans it received and paying Bank of the Bahamas interest on the unsecured bonds.

“The Bahamian people will now have to really be paying for those bad loans,” he told Tribune Business, adding that Standard & Poor’s (S&P) viewed the deal as a ‘contingent liability’ and thus further boosting the national debt.

“I am concerned that the Government was ultimately in control of Bank of the Bahamas when it went bad,” Mr McCartney said.

“Who is to say that if the Government is in control of this company that’s taking over the bad loans, it will not cause that company to go bad as well.”