The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ chairman yesterday backtracked from his admission that politics had influenced past lending decisions, saying he was referring to “perception” rather than reality.

Richard Demeritte said such an “impression” was incorrect, as his remark at Friday’s annual general meeting (AGM) was instead intended to acknowledge the belief among many Bahamians that “politically influenced loans” had been made previously.

However, two shareholders who attended the AGM yesterday told Tribune Business that they both understood Mr Demeritte’s comment to mean there had been politically-motivated lending under previous Boards.

Dionisio D’Aguilar, whose questions had prompted Mr Demeritte’s controversial remark, again used it to call for far-reaching corporate governance reforms at the BISX-listed institution.

He emphasised that the bank’s problems would not be solved under the current ownership structure, and urged the Government to sell its 65 per cent majority stake in Bank of the Bahamas to a private investor.

As a start, the Superwash president said the Treasury and National Insurance Board (NIB) should reduce their voting rights to a minority 49 per cent position, down from the combined 51 per cent the currently hold. Their remaining 14 per cent stake consists of non-voting common shares.

Mr Demeritte, meanwhile, sought to repair any potential damage from his AGM comments, arguing that he was referring to the perception - not the reality - that past Bank of the Bahamas loans had been politically influenced.

Tribune Business reported on Monday that, while asserting that his Board had made “no bad loan decisions”, Mr Demeritte told Friday’s AGM there was “no question” some lending decisions had been influenced by politics in the past.

Mr D’Aguilar, in calling for Bank of the Bahamas to change its corporate governance structure, had said: “It’s very, very important that the directors of this bank have no political affiliation whatsoever. You have to admit it [politically-motivated lending] probably happened in the past.”

This sparked Mr Demeritte’s “no question” reply, but the Bank of the Bahamas chairman yesterday said this was not intended to mean there had been politically-motivated lending in the past.

“If such was the impression created by my comments, it is incorrect,” he said in a statement issued to the media.

“I was merely acknowledging that I was aware of perceptions that politically influenced loans had been made in the past. I was not, however, agreeing to the truth of the matter.”

Mr Demeritte continued: “Although the perception persists, I have never seen any credible evidence that politically influenced loans were granted by executive management, nor requested or instructed to be granted by any Board of Directors at Bank of the Bahamas.

“In fact, I would like to use this opportunity to set the record straight that when the loans, which are now in the non-performing category, were initially granted, they met all of the qualifications for lending.

“What has changed as a result of the economic climate of recent years is Bank of the Bahamas’ appetite for credit risk. There has been, and will be going forward, a fundamental shift in the appetite for credit risk as we restructure and regain our footing on the path to sustainability.”

However, both Mr D’Aguilar and one other minority Bank of the Bahamas shareholder subsequently told Tribune Business they interpreted Mr Demeritte’s AGM comment to mean that politically-motivated lending had been a past REALITY.

Michael Lightbourn, Coldwell Banker Lightbourn Realty’s president, said: “He did say it happened. There’s no question.

“The way he said, he was blaming it on the FNM [and Boards it had appointed]. It interpreted it as him saying: ‘We didn’t do it; the FNM did it when they were in charge’. But he admitted it happened.”

Describing yesterday’s signed statement from Mr Demeritte as “double talk”, Mr Lightbourn suggested that the truth would only come out once ‘bad’ loans to politically exposed persons (PEPS) were transferred to the Bahamas Resolve restructuring vehicle.

That entity has already removed $45 million worth of ‘bad’ credit from Bank of the Bahamas’ balance sheet, with the hold filled by $100 million in government bonds as part of the October 2014 taxpayer-financed ‘bail out’.

Mr D’Aguilar, meanwhile, pointed to “the significance of what the chairman [Mr Demeritte] said: That they have made loans to politically connected people who under normal circumstances would not qualify for the loan”.

Calling on the Government, as majority shareholder, to “shut that tap off”, he said the Bahamian people were continuing to ‘bail out’ Bank of the Bahamas - and poor past lending decisions - via the Treasury monies employed to pay $3.1 million in annual dividends to its preference shareholders.

This effectively represents a ‘wealth transfer’ from the taxpayer to Bank of the Bahamas’ shareholders, and Mr D’Aguilar told Tribune Business: “What’s pi* people off is the taxpayer has to bail them out.

“What is even more frustrating is that Bank of the Bahamas appears to be a conduit to provide friends and family of politically connected people with money to go off and spend.

“The Government has to shut that down; shut that tap off.”

He continued: “What’s amazing is that with every Government corporation, the taxpayer has to come and bail them out. The numbers at Bank of the Bahamas are huge.

“I’m working hard to pay Value-Added Tax (VAT), so that Perry Christie can send money down to the Bank of the Bahamas to cover the loans made to politicians’ friends. That has to stop.”

Mr D’Aguilar said the structure that facilitated this still exists at the bank, describing the proposed election of two independent directors to the Board to represent the 35 per cent minority’s interests as “some cosmetic changes”.

“We still have that mechanism in place where a phone call can be made from someone high up in the political regime to an executive at Bank of the Bahamas, saying: ‘Make that loan’,” he added. “You can’t do that at Commonwealth Bank and CIBC.

“The Government should sell the controlling interest in the bank, get down to 49 per cent of the voting stock,then get out of it altogether and get professionals and private investors in.”