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Serious concerns raised by FSC about survival of NBVI!
The the state-owned financial institution, has come under fire for the last few years from the FSC.
In one of many letters written to the bank from the FSC, serious concerns were raised about the Non-Performing Loan Portfolio (NPL) earlier this year.
Red flag on loans
In one letter, the FSC said, “the Financial Services Commission has been monitoring the NPL of the Bank, which when expressed as a ratio (non-performing loans/total capital), is in excess of 100% of total capital. Furthermore, the non-performing loans is currently in excess of 20%. The BVI banking sector has historically averaged around 3%, so clearly, the Bank is well in excess of the historical average.”
The FSC urged the bank to address the matters with some priority and also gave some stern recommendations as to how the matters will be addressed by the Regulators.
They include, A. Asking the Bank to voluntarily suspend the granting of new loans until the NPL is reduced, B. The FSC could take enforcement action and prohibit the Bank from granting new loans, C. The FSC could allow the Shareholder to voluntarily transfer the non-performing loans to a special purpose vehicle to be managed separately from the Bank.
Close the bank?
Among the other recommendations that could be imposed by the FSC on the NBVI, according to the Letter from the Regulators, is that the FSC “could take enforcement action to suspend or revoke the Bank’s licence because the Bank is likely to pose significant regulatory risk to the banking system and the Bank may not be operating in the public’s interest,” Mr Kenneth B. Baker, the Deputy Managing Director, wrote.
One of the correspondences to the Financial Secretary Neil M. Smith about the state-owned National Bank of the Virgin Islands warned that “the current trend of increasing non-performing loans is clearly unsustainable from a business and supervisory perspective. The non-performing loans have now reached a level which requires supervisory intervention”.
The FSC lectured the NBVI that steps will be taken because the Commission has several obligations in accordance with the provision of the FSC Act and international standards.
Over the past five years the NBVI has been ripe with allegations and reports about internal staff issues, loan repayments and selective decisions on who is taken to court over owing the bank.
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55 Responses to “Serious concerns raised by FSC about survival of NBVI!”
1 - The FSC letter was written earlier in the year. It would be good to know what action the bank and the government has taken since then. For a matter of this importance, there must have been further correspondence. Did the whistleblower have access to these and if so, did he/she/they share with the media?
We can't judge the fate of the bank on just one letter. If the bank was still at the point of failure subsequent to the letter, the FSC would have closed it by now.
2. The NPL portfolio is at 20% for the NBVI compared to 3% to the commercial banks but those banks have much larger portfolios (several times greater) comprising of a fair amount of big loans to manage whereas the NBVI would have a few large loans and several smaller loans.
A few delinquencies on the large loans ($4 - $5m range) on a portfolio of $100+m for NBVI (I think that is the figure that the NBVI used when it published its last accounts in the newspapers), will easily take NPL to $20+m (or 20%).
Is it that a few bad apples have spoiled the whole bunch and once they have been addressed, that NPL falls within industry standards?
We anxiously await the answers.
LB you sound like an "$$. The bank is there to help but within reason, not to just give away people's hard earned money willy nilly just because the people who want it are local.
I say all of that to say our system is rigged. We do have qualified people at the helm but for some reason their hands are always tied by some higher power. Give jack his jacket the boss is qualified sometimes we are recruited to clean up someone else's mess and in the process our good name gets tarnished. Sorry to say the people in Tola who act elite downing in debt, bad payers and airheadish. That's the raw reality.
Keep your keep up girlfriend you're past performance at the other entity was never questioned take this as a lesson learned. People always going to talk but until they walk in someone else's shoes they'll never know the real deal.
Who needs Toronto anyway?