The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas (BOB) shareholders yesterday said it was “very, very troubling” that it was resisting the Central Bank’s regulatory demands, warning this would only further undermine confidence in the troubled BISX-listed institution.

Dionisio D’Aguilar, the FNM’s Freetown candidate, told Tribune Business that he and all other minority investors had already “written off” their investment in BOB after it racked up more than $120 million in collective losses over the past three-and-a-half years.

“It is very, very troubling that they are resisting the regulation of the Central Bank,” Mr D’Aguilar said of BOB. “I don’t think any clearing bank has done that; at least not publicly.

“The purpose of the Central Bank is to regulate the banks operating in the jurisdiction, and if they are making demands on Bank of the Bahamas, and Bank of the Bahamas is resisting, that doesn’t lend confidence to depositors that all is good.”

Tribune Business exclusively revealed on Monday that Bank of the Bahamas is seeking the Supreme Court’s protection from the Central Bank, which is demanding an “immediate” $50 million increase in loan loss provisions and legal action against “politically exposed” bad borrowers.

The Central Bank also wants BOB to convert its $10 million in contingent convertible bonds to common equity Tier 1 capital, with “all future capital injections.... paid in cash and constituting common equity Tier 1 capital”.

Bank of the Bahamas is resisting the $50 million provisioning, and $10 million convertible bonds, demands, which resulted in the Central Bank levying a $100,000 fine for non-compliance with its supervisory requirements.

This prompted the BISX-listed institution to initiate legal action in the Supreme Court on April 7, 2017, challenging the Central Bank’s demands and seeking an injunction to prevent it enforcing these impositions.

Mr D’Aguilar yesterday pierced the corporate veil, pointing out that Bank of the Bahamas’ moves would have been approved by a Board that represents only the interests of its 79 per cent majority shareholder, the Government.

The FNM election candidate suggested that, as Minister of Finance, Prime Minister Perry Christie was the “de facto” chairman and owner of BOB, effectively pitting the Government against the Central Bank.

The demands being resisted by BOB would almost certainly require the Government to inject more capital into BOB, beyond the $170 million directly committed and over $300 million in deposits. Given the Treasury’s cash-strapped position, this is unlikely to be desired

The $10 million bond issue referred to by the Central Bank was the first of three equal tranches, set to ultimately total $30 million, all of which are being 100 per cent financed by the Government.

This commitment comes on top of the $100 million ‘promissory note’ injected into BOB as part of the bail-out deal that left taxpayers ‘on the hook’ for Bahamas Resolve’s bad loans, plus the $40 million used to take up the bank’s entire rights issue last September.

“Are the requirements of the Central Bank so egregious that you don’t want to comply with them?” Mr D’Aguilar asked of BOB, suggesting the Government was “trying to keep a lid” on its problems until after the general election.

BOB, in an advert published in today’s newspapers, does not refute any details published by Tribune Business regarding its legal battle with the Central Bank, and declines to comment on the matter.

It did, though, say: “The bank remains confident that all differences with the regulatory authorities will be comprehensively addressed to the complete satisfaction of all relevant parties within the very near future.”

BOB did not say how this would be achieved, and reiterated its oft-repeated optimism that “a solid foundation is being systematically laid to restore the bank to sustained profitability in the bear future”.

It added: “The Board and management have been keenly focused on this goal, and are convinced of its viability.

“With the continued support of the bank’s majority shareholder and the bank’s thousands of loyal and dedicated customers, the future of Bank of the Bahamas remains very positive.”

BOB’s minority shareholders have, of course, heard this all before over the past two-and-a-half years, but a turnaround has yet to materialise despite repeated promises.

Dr Johnathan Rodgers, the well-known ‘eye doctor’ and another BOB shareholder, told Tribune Business that investors had yet to see details of the bank’s turnaround plan despite promises in late 2014 by its chairman, Richard Demeritte, that these would be disclosed.

“I remember the AGM a couple of years ago,” he said. “We raised many points with the bank’s Board of Directors about the lack of performance, and we were assured by the chairman, Richard Demeritte, that the bank had come up with a plan of action that was palatable and compliant.

“We were told we would be informed of what the action plan is. We’re still waiting.”

Dr Rodgers also recalled how BOB’s former managing director, Paul McWeeney, had pleaded with shareholders to give the bank “time to sort things out”.

“It’s more than two years later and nothing has changed,” Dr Rodgers added. “I’d always said in the past that they were insolvent, and it seems now their liquidity is being challenged. They’re really on a slippery path.

“The fact no one else participated in the rights issue speaks volumes... It’s very unfair on the other banks that these guys have been allowed to get away with what they’re doing. It’s one rule for them, and one rule for everyone else.”

Dr Rodgers, though, praised the Central Bank and its governor, John Rolle, for seemingly getting tougher with BOB and enforcing the law and accompanying regulations.

“I’m happy to see the Central Bank is taking action; it’s something that needs to be done, and I think the minority shareholders will be happy to see the Central Bank taking a more active role in what’s going on with that bank,” Dr Rodgers told tribune Business, questioning how the courts could uphold BOB’s resistance to the regulator.

Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, and another BOB shareholder, described the bank’s predicament as “phenomenal” and confirmed he had written-off his investment.

“Man, I wrote that off a long time ago and don’t expect to see anything out of that,” he told Tribune Business. “The situation just shows the influence the Government has. If that were a foreign-owned bank, it would have already been put into liquidation.

“It’s extremely serious. Anywhere else, the bank would have been closed down, no two ways about it. But because of the politically exposed borrowers, the Government is going to keep it going.”

Mr D’Aguilar backed Mr Lightbourn, adding: “The shareholders have given up on Bank of the Bahamas. There’s only one shareholder; the Government. The rest of the shareholders have written off their investment, don’t expect anything back, and have kissed it goodbye.”