The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government must show the Bahamian people it has credible “prospects of success” for recovering public monies that have been invested in successive Bank of the Bahamas ‘bail outs’, the Chamber of Commerce’s chairman said yesterday.

Gowon Bowe told Tribune Business that the absence of a credible turnaround strategy for the troubled BISX-listed bank meant many Bahamians were viewing the ‘bail outs’ as “dead money”, with little hope of recovering Treasury and National Insurance Board (NIB) assets.

He contrasted the Bank of the Bahamas situation with the US and UK government ‘bail outs’ of their own banks and financial systems during the 2008-2009 ‘credit crunch’ crisis.

Mr Bowe said government interventions in those countries were made on clearly-defined terms, with timelines set for taxpayers to recover their ‘investments’, so that the public could understand the objectives that were being targeted.

He added that none of these conditions were present in relation to Bank of the Bahamas, and called on the Government to show there were realistic prospects for recovering Treasury and NIB assets.

Tribune Business revealed earlier this month how the Government, through the Public Treasury, NIB or a combination of the two, had been forced to buy the “entire” $40 million Bank of the Bahamas rights issue after none of its 3,000 minority investors elected to subscribe for their allocation.

This followed the much-noted earlier ‘bail out’ in October 2014, when a ‘toxic loans for bonds’ swap injected $100 million in government paper on to Bank of the Bahamas’ balance sheet, in exchange for $45.2 million in bad credit.

And there was an even earlier, little noticed ‘bail out’ when the Treasury and NIB took the Government’s collective equity stake in the BISX-listed institution from 51 per cent to 65 per cent.

Following the right issue, that ownership interest is now at 79 per cent, although Mr Bowe said it was unclear whether the $40 million had come from the Treasury, NIB or had been split between the two.

He added that the failure to publicly communicate a credible revival strategy for Bank of the Bahamas was leading many Bahamians to believe they would never recover funds that ultimately belong to them, either as taxpayers or beneficiaries of NIB’s social security programme.

“It is effectively a bail out using the resources of the Treasury or assets of a social security programme,” Mr Bowe said.

“There has to be prospects of success attached to such a bail out, and communications in relation to a turnaround programme.”

He explained that it was presently “not clear”, either to existing Bank of the Bahamas shareholders or the wider Bahamian public, how the troubled institution, which has racked up more than $120 million in losses in just over three years, can be restored to sustainable profitability.

Regardless of whether a change in strategy, a Board and management shake-up or a combination of these was planned, Mr Bowe said: “If it’s not clear to the general public or the investing public, then investments like that by the Government are seen as dead money.

“What is important is that the Government can demonstrate Bank of the Bahamas monies will come back into its cash flow in the future, and they should be able to stabilise the bank’s activities and return it to profitability, so those funds are paid back over a period of ‘x’ years.

“There has to be a turnaround and restructuring plan that is very clear on the milestones being achieved, so that people understand what is being done.”

Some cynics are likely to argue that no such plan exists where Bank of the Bahamas is concerned, and that a restructuring and return to sustainable profitability are impossible unless more ‘bad loans’ are removed from its balance sheet.

The transfer of the 13 ‘toxic loans’, supposedly worth $45.2 million, to the Bahamas Resolve special purpose vehicle (SPV) already represents a transfer of these liabilities from shareholders to the taxpayer.

K P Turnquest, the FNM’s deputy leader, also slammed the $40 million rights issue ‘take up’ as “an incredible use of the Bahamian people’s money when we still have to receive a business plan, a restructuring plan, for Bank of the Bahamas”.

He added: “We don’t seem to be any closer to a turnaround in that situation, and there are continued losses due to these toxic loans that have not been removed from the bank.

“It will be interesting to determine the make-up of those loans and why they have not been removed from the bank. As it stands, we’re throwing good money after bad.”