The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas’ continued existence shows that the Central Bank’s application of its corporate governance guidelines is selective and “arbitrary”, a well-known attorney said yesterday.

Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house attorney, questioned why no one had been held accountable for the BISX-listed institution’s collective $120 million in losses over the past three years.

Addressing a Bahamas Institute of Chartered Accountants (BICA) seminar in Freeport, Mr Leonard also queried why Bank of the Bahamas had been allowed to continue operating despite being in persistent breach of several key Central Bank capital ratios.

He pointed to the Bank of the Bahamas situation as evidence of the Central Bank’s failure to enforce its corporate governance guidelines, and not hold its licensee’s Board of Directors and management accountable for what led to a $100 million ‘bail out’ underwritten by the Bahamian taxpayer.

Quoting from a 2012 presentation given to the Bahamas Association of Compliance Officers (BACO) by Cassandra Nottage, deputy head of supervision at the Central Bank, Mr Leonard said this showed that the corporate governance guidelines were not “prescriptive” or mandatory, but intended merely to “give direction” to licensees.

“The results at Bank of Bahamas, and the fact that it still has a license, is an indication that any enforcement of these guidelines is going to be done in a very arbitrary fashion,” Mr Leonard said.

He argued that the resulting absence of accountability and transparency meant that no one had been held responsible for the spectacular destruction of shareholder value at Bank of the Bahamas, which had built across successive administrations and Boards.

Mr Leonard’s comments are likely to strike a chord with many of Bank of the Bahamas’ 35 per cent minority shareholders, who have been further diluted in the wake of the recent $40 million rights offering.

Several have privately queried why no one has been held accountable for the dramatic decline in their investment’s value, although no one has spoken ‘on the record’.

Former managing director, Paul McWeeney, on whose watch the decisions leading up to the ‘bail out’ were made, is understood to have received a significant pay-off when he left.

And numerous shareholders, and outside observers, have questioned whether the current Board - all government appointees - have the necessary banking expertise and skills to turn Bank of the Bahamas around.

Mr Leonard yesterday argued that the absence of accountability at Bank of the Bahamas had cost Bahamian taxpayers “millions and millions and millions of dollars”.

Apart from the $100 million of government bonds injected to fill the ‘hole’ in Bank of the Bahamas’ balance sheet, the taxpayer is also on the hook for the $45.2 million worth of ‘toxic’ loans transferred from the bank and, potentially, the interest on the bonds if the loans cannot be recovered.

The National Insurance Board (NIB) has also suffered losses as a result of its 29 per cent Bank of the Bahamas stake, and it is likely the social security system may have to pick up most, if not all, of the recent $40 million rights offering.

The Bahamian capital markets have yet to be provided with an official statement on the outcome of the rights offering more than two weeks after it was supposed to have concluded.