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TUESDAY, NOVEMBER 5, 2019
$4.52 Central Bank eyes ‘movable collateral registry’ initiative By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Central Bank is set to study the feasibility of creating “a registry to track movable chattel pledged by borrowers”, such as vehicles, in a bid to improve credit access for deserving borrowers. John Rolle, the Central Bank’s governor, yesterday confirmed the regulator had been asked to investigate this by the Ministry of Finance as a means to improve the information available to commercial banks and other lenders when assessing the creditworthiness of loan applicants. “What’s important when we talk about access to credit, so that there are no misconceptions, is the need more legal reforms in the country so the information system lenders rely on improves,” he said. “The credit bureau is one of them. The Central Bank has also been asked by the Ministry of Finance to put in place a registry to track movable collateral pledged by borrowers - automobiles and other items used to secure debt.” He added that such a registry could also be used to “create information and monitor what happens with legal judgments awarded, and claims made against legal assets. That part of the information system needs to be improved”. Mr Rolle said he was unable to provide “a timeline” for when such a registry will be implemented, but added that technology advances had potentially enabled its creation so that banks and other lenders will be better able to perfect and oversee loan security/collateral and avoid competing claims to the same asset. “We are going to study how it could be done,” he explained. “With the infrastructure improvements the possibility came to mind. We’re going to look in detail at what possibilities exist. At some level it may require some legal reforms.” Bahamian commercial banks and other lenders currently lack complete information on the credit history of many potential borrowers, which makes it impossible to properly assess the risk they pose and price the loan (interest rate) accordingly. And, as a result, delinquent borrowers are able to bounce from institution to
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Central Bank: Dorian inflicts a $2.5bn blow By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
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HE Central Bank’s governor yesterday forecast that total Hurricane Dorian losses could exceed $2.5bn at the “low end” - a sum equivalent to 20 percent of The Bahamas’ total economic output. John Rolle, unveiling the regulator’s September and third quarter economic outlook, said these projections were “not out of range” given the category five storm’s devastating impact on private housing, public utilities and infrastructure in Abaco and Grand Bahama. He warned that a significant “financial resources gap” could develop, despite the Bahamian insurance industry revealing to Tribune Business that insured losses had already surpassed $1bn, due to numerous impacted families and businesses either being totally uninsured or under-insured. While Mr Rolle did not suggest this “gap” could amount to $1.5bn,
• Storm losses ‘could surpass 20% of GDP’ • Bad bank loans to rise to ten-12% of total • But ‘nothing to flinch’ from, says governor
JOHN ROLLE the difference between the Central Bank’s projected total Dorian losses and insurance payouts, he added that those lacking insurance “could face a lengthy recovery process” through having to rely on either their own savings or financial assistance from the government and others to rebuild. The Central Bank governor also predicted that the commercial banking industry’s non-performing loan ratio will rise by several percentage points to hit the ten to 12 percent range
in Dorian’s aftermath, as impacted households and businesses struggled to service their debt obligations in the absence of incomes and commercial activity. He added, though, that such a raised non-performing loan ratio was “not anything to flinch about” for the Central Bank. Mr Rolle said Grand Bahama and Abaco combine for just 14 percent of outstanding commercial bank credit to the private sector, with the latter - the worst-hit island of the two - accounting for just five percent. While this will help impose “some upper limits” on the non-performing loan increase that Bahamian commercial banks are likely to suffer, the Central Bank governor conceded that it was “breathing a sigh of relief in terms of what was the outcome” compared to the scenario if Dorian had made a direct hit on New Providence where most of the country’s
AN EX-Central Bank governor yesterday said the proposed acquisition of CIBC FirstCaribbean could be positive for the Bahamian economy if it “breaks up the cartel” in the banking industry. James Smith, pictured, told Tribune Business that the Colombia-based Gilinski Group could give The Bahamas a much-needed “shot in the arm” post-Hurricane Dorian if it created more competition in the commercial banking industry by “challenging the oligopoly” that presently exists. Conceding that there were “more questions than answers” over the proposed sale of CIBC’s regional Caribbean business, including its Bahamas operations, Mr Smith argued that
economy is concentrated. Still, Mr Rolle’s estimates give a further insight into the scale of the damage inflicted upon the Bahamian economy and society by Dorian, and demonstrate how long, expensive and complex the recovery and restoration process will be. “Even as revised projections indicate that insurance payouts to the private sector could exceed $1bn, the losses - most to private sector assets - could surpass 20 percent of GDP or more than $2.5bn,” he warned. While “key commercial assets” are expected to recover faster than Abaco and Grand Bahama’s housing stock, the Central Bank governor said the process was likely to be uneven because a significant number of storm victims lacked adequate insurance coverage. “There is nevertheless a financial resources gap,
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6,000 restructure debt during 2019 first half By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net MORE than 6,000 Bahamian borrowers applied for debt consolidation loans during the 2019 first half, making it the most soughtafter form of consumer credit by some distance. The Central Bank’s latest Lending Conditions Survey, released yesterday, revealed that debt consolidation loans accounted for more than one-third of all consumer loan applications during the six months to end-June 2019. The volume of applications was also 50 percent greater than the next mostpopular form of consumer loans, namely credit cards, for which Bahamian commercial banks received around 4,000 applications during the 2019 first half. Travel loans, for which there were almost 3,000 applications, ranked third by loan type.
• Consolidation loans most popular consumer form • Consumer credit accounts for 91% of applications • But just 53% of mortgage loan requests backed The Central Bank data further exposes the breadth and depth of the pressures faced by financially-struggling Bahamian households, individuals and businesses, as debt consolidation loans are typically a last resort move to rescue troubled borrowers by combining all their outstanding loans into one to reduce the debt repayment burden. It also highlights how the risk averse Bahamian commercial banking industry continues to concentrate its lending efforts on loans for cars, furniture and appliances, and the luxury “bells and whistles” of life something that threatens to deprive the economy’s productive elements, namely the housing market (mortgages) and private sector
(businesses) of muchneeded financing capital. The Central Bank survey revealed that out of 19,712 loan applications processed during the 2019 first half, some 91 percent - more than nine out of ten, or just under 18,000 - related to consumer loans. The commercial banking industry, badly hit by the housing market crash following the 2008-2009 recession, now views consumer loans as less risky because they can be secured by salary deduction. While the total number of loans processed represented a 17 percent increase compared to the 2018 first half, the Central Bank said: “Consumer loan applications dominated at 91 percent of total requests;
CIBC deal positive if ‘breaks up the cartel’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
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• Ex-governor: More competition to break ‘oligopoly’ • Urges same offer made to Bahamian minority • DPM confirms ‘introduction’ to purchaser
the Gilinski Group should also make the same buyout offer to the Bahamian minority shareholders as it has given to the Canadian banking giant. The region-wide CIBC FirstCaribbean acquisition thus seems likely to provide the first test for The
Bahamas’ Securities Industry (Takeover) Rules 2019, which came into effect on April 17, 2019, when they were published in the official Government Gazette. These reforms were passed as part of a much-touted package of legislation designed to better protect and safeguard minority shareholder rights - a move that secured a significant improvement in this area in the World Bank’s recent “ease of doing business” rankings. CIBC FirstCaribbean International Bank (Bahamas), which is the largest listed stock on the Bahamas International Securities Exchange (BISX) by market capitalisation,
is less than five percent owned by Bahamian minority investors. It is also likely to be the largest and most profitable unit in the group alongside Barbados, accounting for 30-40 percent of its overall business. Given that the 95 percentplus majority shareholder, CIBC FirstCaribbean’s Barbados parent, is seemingly set to undergo an imminent ownership change, this appears likely to trigger the Takeover Rules that require the buyer to offer the same price, and terms and conditions, to the minority shareholders as were offered to the vendor (CIBC).
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84 percent were approved. Most loan denials were due to high debt service ratios, lack of collateral or no down payment.” However, just 53 percent of mortgage applications were approved to further illustrate the ongoing difficulties many Bahamians have in meeting the banks’ more stringent qualifying requirements to enter the housing market. “Mortgage applications rose in comparison to 2018; 53 percent of requests were approved,” the Central Bank added. “Most applications were for purchases of already built homes... but growth in financing requests for new construction mortgages was also noted.
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$4.56 ‘Totalled’ Abaco resort awaiting summer re-open By YOURI KEMP AN ABACO resort operator yesterday said her property is unlikely to re-open until summer 2020 after it was “totalled” by Hurricane Dorian with “nothing left of the marina”. Molly McIntosh, general manager of the Bluff House Beach Resort & Marina on Green Turtle Cay, said the absence of utilities and a workforce to assist with clean-up, repairs and restoration were among the major challenges faced by those seeking to rebuild. “We got totalled,” she told Tribune Business. “There is nothing left of the marina. The rooms had a lot of water damage. There are a few challenges there is a problem in hiring people. There is no one to hire to do work at this time. “I have four guys now that I have re-hired to help with clean-up. There are huge trees and metal roofs and other debris littering the beach. They are cleaning up by hand but have made a lot of headway. The insurance company has not settled with us as yet. My owner does not know how to plan because he does not know how much to expect from the insurance company.” Ms McIntosh then added: “The dump is burning and blowing right into my house. The stench is horrible. That’s the problem with burning all of that treated wood; they have a lot of chemicals in them and it makes a lot of toxic smell. “The prime minister said that barge for the dump would be brought to the island the evening he came to speak to us at the Town Hall meeting. But we have not seen the barge yet and nothing else is being said about it.” Dr Hubert A Minnis reaffirmed that the Abaco Cays would be provided with support for debris clearance and barge export at a press conference on post-Dorian clean up efforts held at the weekend. However, Ms McIntosh said: “We don’t have electricity now. The generators we have running now are very expensive to run. Bahamas Power & Light are working slowly but surely from what I see. “Some also have water in some places in town from what I have been told. I have not had water since before the storm. This makes it challenging to get work done. There is a
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