The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Loans to politically-exposed persons (PEPs) “never” exceeded more than 5 per cent of Bank of the Bahamas’ total outstanding credit portfolio, its managing director says.

Paul McWeeney, writing in the BISX-listed institution’s newly-released 2014 annual report, was at pains to emphasise that the bank’s lending decisions have never been governed by political considerations.

Despite the bank now being 65 per cent majority-owned by the Government (via the Treasury and National Insurance Board), Mr McWeeney said it had never granted commercial (business) loans to applicants who were already sitting MPs.

While borrowers may subsequently enter Parliament after such loans are granted, Mr McWeeney said there were only “few, extremely few” occasions when sitting MPs had been granted consumer loans by Bank of the Bahamas.

Reiterating that such loans were “objectively” granted, based on Bank of the Bahamas’ credit criteria, Mr McWeeney said some had “greatly exaggerated” how large PEP-related loans were in relation to its total portfolio.

“The overall size of such loans has been greatly exaggerated in some sections of the media,” Mr McWeeney said.

“The totality of such loans was never more than 5 per cent of the bank’s total outstanding loan book.”

Taking Bank of the Bahamas $734.477 million loan book at end-June 2013 as a base, Mr McWeeney’s comments suggest that at that point, PEP-related credit never exceeded $36.7 million.

His message to Bank of the Bahamas shareholder said: “I wish to state emphatically that it is not, and never has been, the bank’s practice to grant commercial loans to persons who, at the time they apply for credit facilities, are Members of Parliament.

“If a customer subsequently enters political life, the bank has no control over such an event. However, there are few – extremely few - instances where retail loans were granted to sitting Members of Parliament in accordance with standard, objectively applied credit adjudication criteria.”

Mr McWeeney added: “Secondly, any connection between the politics of a customer and the granting of credit facilities to him or her is purely coincidental.

“The record is clear on this point. Loans – and these are mainly commercial loans in question here – would have been made on the basis of normal credit adjudication criteria objectively applied. Such loans would not have been made because of, or based on, the politics of the persons involved.”

It remains to be seen whether Mr McWeeney’s comments disabuse many observers of the perception that Bank of the Bahamas’ lending decisions have become increasingly susceptible to political interference.

However, the Bank of the Bahamas managing director said no PEP-connected loans were among the $100 million worth of ‘bad’ credit transferred to Bahamas Resolve as part of the recent rescue plan for the BISX-listed institution.

Without explicitly saying so, his remarks largely appear designed to rebut allegations made by the Punch tabloid newspaper, which has conducted an unrelenting campaign against the bank.

Mr McWeeney, meanwhile, also appeared to distance himself from many of the lending decisions made by Bank of the Bahamas in recent years, pointing out that his role in this area had been “curtailed” since 2009.

He said the responsibility for decisions on who should get loans, and credit risk management, rested with an “independent division” in Bank of the Bahamas that reported directly to the Board’s Credit Risk or Credit Adjudication committees.

Thus, in heavily coded language, Mr McWeeney appears to be laying blame for at least some of Bank of the Bahamas’ poor lending decisions on the Board of Directors and its various committees, plus part of the bank’s management team.

Suggesting that Bank of the Bahamas would undergo an organisational restructuring when it came to credit decisions and risk management, Mr McWeeney said there “appears to be a misconception” about his role in past loan extensions.

“It will be noted from the Organisational Charts contained in this annual report (and indeed others circulated in the past) that the managing director does not have direct involvement in any aspect of general credit risk governance or adjudication,” Mr McWeeney wrote.

“These functions and the associated responsibilities repose in an independent credit risk division of the bank that reports directly to the Credit Risk Board Committee or Credit Adjudication Board Committee.

“In contrast, the managing director’s specific credit adjudication function was gradually curtailed at the operating level in keeping with regulatory guidelines introduced in 2009. However, the bank is revisiting this structure with a view to making appropriate changes that will better ensure positive results in the immediate future.”

Mr McWeeney’s comments in this regard were supported by Bank of the Bahamas’ chairman, former auditor general Richard Demeritte, who detailed the same credit risk management structure in his message to shareholders.

The annual report was also noteworthy for revealing that attorney Roger Minnis was removed as chairman of the Board’s Credit Risk Committee back in June, albeit with no explanation given.

He was replaced by Alexander Reckley, while Don Davis also took over from attorney Rawson McDonald as chairman of the Board’s Finance and Capital Development Committee.

And, while the former Board has largely been re-appointed by the Government, Messrs Minnis and McDonald are the only two not to resume their former positions.

Both Mr McWeeney and Mr Demeritte said Bank of the Bahamas’ review of its executive and senior management structure was progressing, ahead of anticipated changes to the way it operates.

“The bank is leading a number of initiatives ranging from enhancing its franchise through new business opportunities, rationalising operating costs and people, ensuring the bank has the right skillsets to carry it into the future,” Mr Demeritte added.

Mr McWeeney, for his part, said: “On the subject of succession planning and management restructuring, including changes at the senior and executive management levels of the bank, I’m pleased to report that these are vitally important matters and presently the subject of advanced study by the Bank.

“An appropriate announcement to shareholders and the general public will be made in due course.”