By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bank of The Bahamas bail-out vehicle has been able to meet its annual $6m interest payment for the past two-and-a-half years without creating a “headache” for the Government, its chairman has revealed.

James Gomez, Bahamas Resolve’s chairman, told Tribune Business that the so-called ‘bad bank’ created to take the BISX-listed institution’s toxic commercial loans has managed to cover that annual obligation to the latter from selling-off real estate and other assets pledged as loan security.

The near-$6m annual interest payment is due on the $167.7m promissory note that was injected into Bank of The Bahamas’ balance sheet to fill the hole created by the removal of the delinquent loans, and Mr Gomez said Bahamas Resolve had managed to shoulder this responsibility rather than forcing the Bahamian taxpayer to intervene.

Confirming that the interest payment was just over $2.9m semi-annually, or $5.878m for the full year, he told this newspaper: “We’ve been paying that ourselves. There was a payment that was due on August 31. We have paid about $2.2m, and are about to settle the balance of that in short order.

“I wanted to be in a position where we did not have to go to the Treasury or financial secretary.... We’re moving along. We’re selling, trying to pay our expenses. We haven’t gone to the Government for any support in recent times. It’s been paid to Bank of The Bahamas.

“We’ve acted just like a regular customer who, if he cannot make the whole interest payment in full, pays some and in 30 days settles the balance as opposed to putting the pressure on the Government,” Mr Gomez added. “We have a pandemic on, all these social issues, so the Government doesn’t need that headache.”

The Bahamas Resolve chief said just four large borrowers, who he did not identify, collectively accounted for between $80m-$90m of the delinquent loans transferred to the Bank of The Bahamas bail-out vehicle. These amounted to around “one-half, or just more than half”, of the outstanding sum, and he added: “All of those are involved in litigation against Resolve.”

Mr Gomez said that under his watch Bahamas Resolve had completed outstanding financial statements for four years, while the final two “should be complete within 60 days”. The lateness of Bahamas Resolve’s financial reporting had been a key concern for the Government’s latest Fiscal Strategy Report, released in December 2020.

“The Government continues to work with Resolve to establish greater operational transparency through regular financial reporting and publication of asset sales information. The first audited financial statements, covering activities for the years 2014 through 2018, is scheduled to be released in December 2020,” the report said.

Tribune Business previously reported that the bad loans transferred to Bahamas Resolve were worth just 37.6 percent of the $267.7m paid for them, and which subsequently became liabilities for the Bahamian taxpayer.

Noting that the two Bank of The Bahamas bail-outs had left Bahamian taxpayers on the hook for a sum equivalent to 2.2 percent of the economy’s total output, the last International Monetary Fund (IMF) evaluation urged the Government to conduct “a strategic review” of Bank of The Bahamas, develop “a reform plan” and strengthen its governance to prevent a repeat of the “poor lending practices” that almost led to its demise.

“The bank is the only case of significant instability in the banking system the past 15 years,” the IMF’s financial assessment said of Bank of The Bahamas. “BOB’s difficulties began to build as revealed in 2011 when the Central Bank discovered material operational weaknesses.

“A subsequent examination noted an outsized level of lending to politically exposed persons (PEPs), among other deep problems in commercial lending. Negative publicity led to liquidity tightness in late 2012 and early 2013, with large depositors withdrawing their funds.”

Describing Bank of The Bahamas’ bail-out as “two-staged”, the IMF said of the Christie administration’s $100m effort: “After the restructuring, the share of regulatory capital increased to about 47 percent of risk-weighted assets and government control went from 65 percent to 79 percent.

“Justifications for the bailout were the potential for instability, the lack of funding in the DIC to cover insured depositors ($120m in insured deposits with less than $40m in the DIC), and the large government deposits placed at BOB.”

The Fund added: “A second transfer of $176m in gross book value of problem assets (purchasing distressed assets at gross book value is not in line with good international practice) was initiated in August 2017, similar in terms to [the first time]. About this time the promissory notes issued during 2014 were redeemed by the Government.”