The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s newly-elected deputy leader has again urged the Government to “come clean” over the $100 million Bank of the Bahamas ‘rescue’, while also questioning if the institution’s managing director was “buck passing”.

K Peter Turnquest, who is also the Free National Movement’s (FNM) finance spokesman, said Paul McWeeney “has to take responsibility” for the lending and credit risk management policies that led to the taxpayer intervention.

“The buck stops with him,” Mr Turnquest told Tribune Business, after Mr McWeeney, writing in the bank’s annual report, suggested he played little to no part in deciding who Bank of the Bahamas granted loans to.

Tribune Business revealed on Friday how Mr McWeeney, in his message to shareholders in Bank of the Bahamas’ 2014 annual report, 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 appeared 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.

His comments 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’s organisational structure seemed to provide further support, showing that the bank’s risk management and credit divisions reported directly to the Board, rather than Mr McWeeney as managing director.

Tribune Business was again unable to contact Mr McWeeney, either at his office or on his cell phone, for comment despite trying to reach him both on Friday and over the weekend.

However, neither his message to shareholders, nor the revelation that Bank of the Bahamas had suffered a $6.5 million loss in its 2015 first quarter, satisfied Mr Turnquest.

The newly-elected FNM deputy leader said the bank’s annual report only affirmed the “serious questions” many observers had about the events that resulted in ordinary shareholders suffering an almost-$69 million loss for its 2014 financial year.

Mr Turnquest then accused the Government of downplaying the Bank of the Bahamas ‘bail out’, which saw the bank transfer $100 million worth of ‘non-performing’ commercial loans to a newly-created ‘bad bank’, Bahamas Resolve, in exchange for government bonds of the same amount.

“With respect to the Resolve Corporation, we are yet to hear very much detail on how it’s to be structured, who’s in charge of it, and how they’re going to recover the Bahamian people’s money,” he told Tribune Business.

“The fact these assets were moved to shore up the bank’s capital ratios is a very significant event that the Government continues to trivialise for obvious reasons.

“The Bahamian people would like to know the details behind the 13 loans transferred to Bahamas Resolve that made up this $100 million.”

The Government has yet to name the accounting firm that will be charged with administering Bahamas Resolve and collecting on its bad loans.

Several sources on Friday suggested that it had turned to Caves Village-based Kikivarakis & Co, headed by former Deloitte & Touche (Bahamas) partner, Anthony Kikivarakis, to perform this role.

Tribune Business could not confirm this, though, and Mr Kikivarakis could not be reached for comment.

John Rolle, the Ministry of Finance’s financial secretary, said he “couldn’t comment” when asked if the Government had selected Kikivarakis & Co for the task.

“I think there should be some announcement this week,” he added. “I know they have been making some progress.”

Kikivarakis & Co has already been engaged by the Government for debt collection work, specifically in regard to outstanding real property taxes, so its selection here would come as little surprise. Its principal is also chairman of the Bahamas Maritime Authority (BMA).

With government agencies being directed to do business with Bank of the Bahamas, and deposit money with it, Mr Turnquest said there were potentially serious ramifications if the BISX-listed institution failed to recover.

“All of this ought to be of concern, not only to shareholders but the Bahamian people and depositors,” he added.

“This is not only a bail out but a propping up of the bank, and any shocks could have very negative repercussions.

“They just need to come clean with where it is and be transparent about it, so the Bahamian people will not have to guess about what is there, and they can regain confidence in the bank.”

Writing in the bank’s 2014 annual report, 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.”

But Mr Turnquest responded: “He’s probably trying to pass the buck, but at the end of the day he is the managing director, and has a responsibility to the Board and the shareholders to ensure proper lending practices and controls are in place.

“To the extent there’s some breakdown of credit policy, again he has to take responsibility for it. The buck stops with him.

“At the end of the day, the managing director has a responsibility. I don’t know how he extricates himself from the credit policies of the bank.”

Bank of the Bahamas’ annual report confirmed that ‘non-current’ loans increased by 61.7 per cent over a 12-month period, growing from $157.3 million at year-end 2013 to $254.4 million at June 30, 2014.

The bank blamed its 2014 loss on the global recession and its aftermath, which affected borrowers’ ability to repay, especially its large commercial loan customers.

It adds in the annual report that loan loss provisions were exacerbated by declining collateral (mainly real estate) values for troubled credit, in addition to borrowers failing to repay.