PM ON BANK OF THE BAHAMAS
Re: Bank of The Bahamas (BOB)
The one thing we should all be united on at all times is the need for a stable banking system. What this means is that we should never do or say anything that undermines public confidence in the stability of our banking system. It means that we need to avoid doing things publicly, or saying things publicly, that may jeopardize the stability of a particular bank or undermine public confidence in it.
If you have a concern about the way a particular bank is operating, if you have a concern about its stability or its viability, you can, if you’re really serious and well-intentioned about it, do one of two things, or perhaps both:
Firstly, you can seek to sit down with the bank directly to get the answers to the questions that you have.
Secondly or alternatively, you can seek an audience with the bank regulators, the Central Bank of The Bahamas, and discuss your concerns with them.
In fact, in the case of the Bank of The Bahamas, there’s even a third option. Because the bank is majority-owned by the government, you can simply come to see me as the Minister of Finance or see the Member for Golden Isles as the State Minister of Finance. If you don’t want to deal with political figures, you can even sit down with the Financial Secretary to discuss your concerns and get the answers to any questions you may have.
So that’s what you can do if you’re a responsible member of parliament who is really interested in getting the facts and if you’re really interested in being a part of the solution rather than being a part of the problem.
But did any of the members opposite do any of those things last week or any time before or after? No! They put on placards instead and marched down to the Bank of The Bahamas with the media in tow. They didn’t ask to meet with anyone to get the facts. No! They were just interested in grandstanding for the newspapers and for television, trying to score some cheap political points – but without any thought whatever for what their actions and their words might do to injure the bank; to put it in jeopardy; to put customers of the bank in jeopardy; to put hundreds of businesses and thousands of Bahamian jobs in jeopardy. No thought about that whatsoever. No! Instead it was all about politics of the cheapest, most opportunistic kind.
Happily, the demonstration by the FNM backfired badly or as the Guardian put it, it “failed to get any traction”. Indeed they couldn’t pull more than 50 people. What an embarrassment that must have been for the leadership of the Party and for the members opposite. Even their own supporters knew that it was complete nonsense what their leaders were doing out there on Shirley Street, and so they stayed away; they wanted no part of it.
Besides, FNM supporters understood only too well that BOB’s problems had actually come about on the FNM’s watch, years before now. So, raising the cry against the bank was really akin to raising the cry against oneself. Politically, it was just downright stupid!
Be that as it may, the point I’m making, Mr. Speaker, is that banks – all banks – are fragile things in the sense that they depend on public confidence. Great care has to be taken, therefore, to be responsible and circumspect in the way that we approach public criticism and public action against banking institutions.
Darren Cash and BOB
And speaking of the FNM and the BOB, I just need to add a word about Darren Cash, the former chairman of the FNM – the same man who could only muster 19 votes in his bid to become Deputy Leader of the FNM. His own party showed him what they think of him by those humiliating numbers. But he seems undeterred. He seems to have a particular obsession with the Bank of The Bahamas. He knows why he does
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. And he must know that I know why he does. And if he persists I will have no hesitation whatever in letting the whole country know what is really behind this obsession of his about BOB.
In the meantime, let me rest content by merely saying this: Darren Cash has zero credibility when it comes to speaking about The Bank of The Bahamas. Zero! In fact, he really has some nerve to even open his mouth about the Bank of The Bahamas. The words “Bank of The Bahamas” should never ever issue from his lips.
But like they say, you say some, and you save some. And so that’s all I have to say about Darren Cash today.
Industry-wide losses but everybody’s Singling Out BOB!
A lot of folks – and they include the members opposite – have been beating up on BOB over its loan losses. These critics want everybody to resign: the Managing Director, other senior executives, the chairman and the whole board. “They all have to go”: that’s been the war-cry.
Now isn’t that something! First Caribbean/CIBC (Bahamas) reported a loss of $183 million dollars for the first 9 months of last year because of its commercial loan losses – but not a peep from these same critics about that; not one peep! Why hasn’t the war-cry gone up for the management and board of First Caribbean/CIBC to resign? It’s a public company too. It made big loans and then got burnt in the recession and fallout from the global financial crisis. But not a murmur, not a peep.
And on top of that, FCIB/CIBC have been laying off people; cutting this and cutting that, but again not a peep. But when it comes to BOB, it’s the exact opposite “the war-cry goes up: they all have to go!
But it doesn’t stop there. RBC/FINCO also reported major losses, again because of loan losses. But again hardly a murmur of protest from the same people who are raising hell over BOB. And not a peep from the Opposition either!
Scotiabank is no different either. They, too, have been taking a beating on their loan losses. But again not a peep from anybody.
It’s unfair, Mr. Speaker, and it’s plain wrong! BOB is being portrayed as if it’s the only bank in town that has had its problems because of loan losses. All the big, multinational Canadian retail banks here are in the same boat for the same reason: they are all sustaining losses because of non-performing loans that were made in more or less the same period before the big recession and meltdown occurred.
And the same thing is happening to banks all across the region. Scotiabank, to take but one example, has announced that they intend to close 370 branches in the region.
Down in Bermuda, the Government in 2009 had to step in to orchestrate a “bail out” of Butterfield Bank to the tune of 200 million dollars.
As the then Minister of Finance Paula Cox put it in her statement to the legislature:
“Butterfield’s Bank approached the Ministry of Finance after it had exhausted options to raise capital in the private sector without any form of public assistance. That is a regrettable reality in banking sectors around the world in these times of financial and economic turmoil.
Banks in many jurisdictions, including the United States, the United Kingdom, Europe and Australia have resorted to different forms of public sector assistance to raise their capital levels.”
In Jamaica, CIBC had to bail out its FCIB subsidiary by injecting US$70 million.
Farther afield, the Canadian government has had to spend more close to 200 billion dollars to support troubled Banks.
In the U.S. the level of financial support was very considerable greater, of course.
So, why is BOB being singled out? The Government, as the majority shareholder, stepped in to provide the necessary support to protect the Government’s investment in the bank; to protect the interests of depositors and the very many businesses that depend on the bank; and to guard against systemic risk to the banking system as a whole.
So, with all the fuss that has been made about BOB and the Government’s support of BOB, you really have to wonder why. You really have to wonder if there isn’t a hidden agenda somewhere to weaken the Bank of The Bahamas so that the vultures can come swooping down and gobble it up.
BOB on an upward path with a bright future
Well, the vultures will never succeed – not while this Government is in power! If that’s their aim, they can forget it. This government will never allow them to succeed.
On the contrary, this government is going to continue to strengthen BOB; is going to continue to nurse it back to full health; is going to continue to stand behind it, is going to continue to assist it as it reforms its structure and policies, – including bringing on BOB’s board some new independent directors – as the bank re-positions itself to capitalize on new markets and increased volumes of government-related business, backed at all times by the full faith and credit of the government.
I have every confidence, therefore, that BOB is not only on the right track now but that it will return to profitability in the not too distant future. Certainly, its balance sheet has already been substantially improved as a result of more than 100 million dollars in bad loans being taken off its books and placed with Bahamas Resolve.
The future for BOB looks bright!
The other banks have brighter days in store too!
And happily all of the banks here can look forward with renewed optimism to a resurgence as well. Indeed the Jamaican Gleaner reported just yesterday that at a conference of the big Canadian banks in Toronto on Monday past, a spirit of optimism about 2015 and beyond resonated strongly.
Indeed RBC’s CEO, David McKay was quoted as saying:
“we feel strongly that we will have a strong rebound in Caribbean performance in fiscal 2015”.
I was assured of much the same thing about RBC’s prospects in The Bahamas when I met with the regional head of RBC on Friday past. Their faith and confidence in The Bahamas – which is still the major breadwinner for RBC in the region – is stronger and brighter today than ever before. Indeed I expect some important announcements in this regard to made shortly.
And there’s no question that the stable and prudent economic and fiscal policies of this government; the integrity of our regulatory regime and monetary system, and the comparatively brilliant economic prospects of The Bahamas, spearheaded by the imminent opening of Baha Mar, are major drivers of the renewed confidence that RBC has in The Bahamas today. I expect the other Canadian banks to follow the same path too.
BOB – Paul McWeeney
As you are aware, the present Managing Director of BOB, Paul McWeeney, has announced that he will not be renewing his contract and that instead he will be retiring as Managing Director. His contact requires that he give 6 months’ notice and he served this 6 months’ notice of his intention to retire in December. Thus, he will leave the bank in June of this year after having served the bank for 20 years, the last 14 of which were as Managing Director.
I want to make it clear that this was Paul McWeeney’s decision and his alone. He was not asked to do it; he was not made to do it. It was his decision.
But I can’t blame him for doing it because no one should have to endure the kind of abuse that he has had to put up with for more than a year now. And he has indeed been unfairly blamed for the Bank’s problems.
But now that Paul McWeeney has decided to leave, there are a couple of points I need to set the record straight on.
Firstly, under Paul McWeeney’s leadership of BOB, the bank grew impressively, and he needs to be recognized for that.
He joined the Bank in 1993, following a successful career with the Chase Manhattan Bank both here and abroad. He was hired under my predecessor, the former Prime Minister and Minister of Finance, the Rt. Hon. Hubert Ingraham.
When Paul joined the bank, it had total assets of only 93 million. Under his leadership, this number increased more than 10 fold – to more than 900 million dollars by 2012.
In addition, the equity of the bank increased from only 11 million dollars to a high of $142 million dollars.
Net income rose from a mere $291 thousand dollars per annum to a high of $10.7 million dollars, resulting in dividends to the Government alone of more than 50 million dollars over the years.
Job creation for Bahamians expanded dramatically as well. When Paul joined the bank, it had fewer than 100 employees. Today the Bank employs close to 350 Bahamians.
Moreover, the bank has grown its branch network from only 5 to 13, servicing not only Nassau and Freeport but other islands of our Commonwealth that the other banks have no interest in serving at all. If it wasn’t for BOB these islands would have no banking facilities. In this regard, BOB has served an important national purpose even though the costs associated with it have obviously impacted profit levels over the years.
Under Paul’s leadership, BOB also scored a number of pioneering banking successes in The Bahamas:
• First bank to establish a stand-alone credit card issuing and processing centre in the Bahamas;
• First bank to introduce prepaid VISA branded cards
• First bank to introduce e-commerce;
• First to introduce “e-notifier”;
• Only bank to have Bahamian currency certified in a way that permits actual cash deposits at ABMs
In addition, Paul McWeeney chaired the Bahamas Automated Clearing House from infancy to its launch. BACH is fully functional today and is extremely profitable.
So, Paul McWeeney was a man of many successes and many firsts, and BOB was consistently profitable, year after year, until just two years ago when the Bank’s loan portfolio and the depressed value of underlying security deteriorated – just as happened with the other banks that had invested heavily in commercial and residential mortgage lending – indeed all the banks except Commonwealth and Fidelity that are really only low-risk consumer lending institutions that live or die on salary deductions from their customers.
But it needs to be emphasized that the deterioration in the quality of the loan portfolio at BOB was not because of Paul McWeeney but rather was primarily the result of the 2008 global economic and financial crisis and the impact it had on the ability of troubled businesses to service their commercial loans. That was no more Paul’s fault than it was Nat Beneby’s fault at RBC or Marie-Rodland-Allen’s fault at FCIB or the managing director of Scotiabank. It had nothing to do with any of them either.
In any case, the Bank experienced its first financial loss in 20 years. Strange, how people only remember the bad times, never the good.
Now that Paul McWeeney has decided to leave the bank and to pursue other things, I just want to take this opportunity to publicly commend him for his many successes in leading the bank over the years, and wish him success in his future endeavours.
The Chairman and the board
I also want to commend Richard Demeritte and the BOB board for being a part of the solution and not the problem . They have all worked very hard to address the bank’s problems.
The calls for them to resign are ludicrous, frankly. As the old folks would say “they just reach!”. They have only been in office for the past two years; indeed some of the members for even less than that. So, where does the Opposition get off demanding their resignation? For what? It makes no sense. What about the BOB boards that sat under the FNM when they were in power and when problem loans were made and approved by those FNM boards? What should happen to them? What’s the FNM’s position on that? It’s just plain crazy!