business@tribunemedia.net
MONDAY, DECEMBER 3, 2018
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BRIAN MOREE QC
Bahamas needs more than laws for dispute centre By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas must do much more than just pass laws if it is to realise a 20-year ambition to become “this hemisphere’s arbitration centre”, a well-known QC has warned. Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, told Tribune Business that “a holistic approach” requiring technical, administrative and marketing skills was essential if this nation is to turn an improved legislative platform into a much-needed new business opportunity. While praising the Government for recently bringing two arbitrationrelated bills to Parliament, Mr Moree said much now depended on its “sustained commitment” to treating the issue as a “high priority” and allocating the necessary resources to finally establish such facilities in The Bahamas. The Government tabled the Arbitration (Amendment) Bill 2018 and International Commercial Arbitration Bill 2018 just 24 hours after Mr Moree himself, addressing a Chartered Institute of Arbitrators luncheon, urged The Bahamas to end “20 years of talk” on whether it can realise its potential as a commercial dispute resolution centre. Speaking to this newspaper following the Minnis administration’s move, Mr Moree suggested The Bahamas seek out partnerships with existing arbitration centres such as the Permanent Court of Arbitration in the Hague as a way to obtain essential expertise and resources. Citing numerous “synergies” with The Bahamas’ existing financial services and maritime industries, he argued that an arbitration centre would also have “a very positive domestic impact” by reducing the amount of litigation currently over-burdening the court system. Mr Moree, though, warned that success would require hard choices such as an immigration policy that minimised “bureaucracy and red tape” for foreign arbitrators, technical experts and witnesses coming into The Bahamas to conduct proceedings. A supporting IT platform, together with case and document management systems, is also essential if The Bahamas is to “deliver” the swift
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BOB chair: ‘Peanut’ profits make dividend premature By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
B
ANK of The Bahamas (BOB) chairman says it is “premature” to discuss resuming ordinary shareholder dividend payments when profits todate have been “kind of peanuts”. Wayne Aranha told the BISX-listed institution’s annual general meeting (AGM) that both Board and management were focused on returning the troubled lender to sustainable profitability, and higher returns for a bank of its size, before looking at capital returns to investors. He added that BOB needed to “get running on a V8 engine” following years of sustained multi-million
• ‘We need to get running on V8 engine’ first • Bank ‘plagued’ with high staffing turnover • Moving to change ‘aging systems’ dollar losses that have left it with a $137.593m accumulated deficit, forcing it to be rescued via two government bail-outs and a rights issue entirely financed by Bahamian taxpayers. Confronted with a question about when payments might resume, Mr Aranha replied: “It’s premature to talk about when we will pay a common share dividend... I know everybody is anxious about when we will get to that point of paying a dividend. It would be premature to guess. “We, as seen from the level of provisioning, are not yet running on a V8 engine - assuming it’s a V8
and not a V12. I’m hesitant to look to the future to say when we will get a common share dividend.” Mr Aranha said he thought BOB last paid a dividend in either 2012 or 2013, the years just prior to the first Bahamas Resolve transaction in which $100m worth of government bonds were injected into the bank’s balance sheet in exchange for loans owed by 13 delinquent borrowers. Rather than dividends, the BOB chairman said board and management focus needed to be on sustaining - then growing - BOB’s bottom line following its recent return to
profitability, and generating shareholder returns at a level consistent with a bank of its size. “The concentration now must be on sustainable profitability,” Mr Aranha told shareholders. “We look now and say we made $1.966m [in the 2019 first quarter] compared to $658,000, but after this $15m payment to preference shareholders (see other article on Page 1B) we will have $150m in capital. A $1m profit on that is kind of peanuts. “The board must clearly focus the bank to that point
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BOB ‘reputation’ boost from $15m repayment By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net BANK of The Bahamas believes it will boost its “reputation and creditworthiness” by repaying its last $15m in preference share debt, and declaring an interest dividend, before year-end 2018. Wayne Aranha, the BISX-listed institution’s chairman, told shareholders at its annual general meeting (AGM) that the repayment - besides boosting the bank’s standing with capital markets investors - will also “eliminate high cost funding”. He disclosed that Bank of The Bahamas (BOB) primary regulator, the Central
* Pref investor payout, dividend, before year-end * Bank ‘still short of returns investors expect’ * Finding lending opportunities tough Bank, has approved both the principal repayment to holders of Series A and B preference shares plus the declaration of interest on them via a dividend payment. BOB’s sustained eightfigure annual losses from 2014-2017 resulted in the suspension of preference share dividends in December 2016, and their effective resumption through the year-end payment depends on the bank having generated sufficient profits to finance the payment.
Mr Aranha said the outstanding interest needed to be paid as it effectively represented a potential “claim” the preference shareholders may have against BOB, although he emphasised the dividend’s declaration was not yet a certainty due to the conditions imposed by the Central Bank. “On September 28, 2018, the bank obtained the approval of the Central Bank to redeem outstanding and issues preference shares amounting to $15m,” the BOB chairman
revealed, adding that the required 90 days’ redemption notice was immediately given to investors. He added that the regulator had also given approval to pay the interest dividend “on condition that the bank generates a profit from which dividends can be paid”. The date for both the principal and interest payment is December 27, 2018. “The board intends to declare payment of a dividend,” Mr Aranha said.
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GOWON BOWE
Accountants await business licence regulation change By NATARIO MCKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net THE Government is expected to “reverse” by mid-December its requirement for certified bank statements to accompany business licence renewals, a top accountant has revealed. Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business: “There have been several meetings and conversations on the issue. I think they [the Government] have indicated that they intend to reverse what was recently put into play. There has been a commitment that between now and the middle of December the necessary amendment to roll the requirements for audited bank statements will be addressed.” This newspaper understands that KP Tunquest, deputy prime minister and minister of finance, will likely meet with the managing partners of Bahamian accounting firms this week to resolve the controversy that erupted over the requirements set out in the business licence regulations. Mr Turnquest confirmed to Tribune Business that informal talks were being held over the issue, and that the Government would be making a statement on the matter “in due course”. The amended regulations, which were put into
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Bahamas urged: ‘Heed’ fiscal council warning By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas would be “very wise to heed” findings that a new fiscal watchdog’s credibility will be enhanced the more independent it is from the Government. Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that this nation does not yet match up to the criteria set out for best-performing Fiscal Responsibility Councils in a recent Inter-American Development Bank (IDB) report. The report, entitled Fiscal Councils: Evidence, common features and lessons for the Caribbean, zeroes in on The Bahamas and Grenada as the two smallest countries to establish such bodies.
* ‘Not fully there’ with IDB findings * Bahamas smallest in world to have body * More effective with greater independence It says the most effective Fiscal Councils are those with the greatest operational and financial independence from their governments, and that it is “preferable” that their scrutiny go beyond just the central government to include state-owned enterprises (SOEs) and local government authorities. The Bahamas’ Fiscal Responsibility Council, whose five members are supposed to be appointed in time for the 2019-2020 budget next May, will only be focused on the central government with SOEs and so-called public-private partnerships (PPPs) excluded from their remit. In addition, ORG has
consistently called for the council to have a “more proactive role” in contributing to fiscal policy, and to be able to enforce their recommendations and decisions - something the Government did not accede to in the recently-passed Fiscal Responsibility Act. Responding to the IDB report’s findings, Mr Aubry said: “I think that we are not there in the full capacity... We’d be very wise as a country to heed these points. “We’ve started to take the path down that road. It’s a progression. We’re moving on the pathway to more open government, more transparency, more accessibility and through
the Ministry of Finance there’s been greater access to information.” Some 37 countries had established Fiscal Councils by end-2015, and the IDB report said: “Since 2017, two Caribbean countries — Grenada followed by The Bahamas — have created fiscal councils. They are the smallest countries (by population) in the world to put such agencies in place. “In The Bahamas, Sections 17 to 22 of the Fiscal Responsibility Bill [now Act] 2018 prescribe the establishment, functions and constitution of a Fiscal Responsibility Council (FRC). The FRC’s mandate is to assess compliance with the [Act’s] general
principles, fiscal responsibility requirements and fiscal objectives. “This mandate also includes a requirement to advise on broader fiscal and budgetary matters, including the fiscal strategy report, annual budget, midyear review, pre-election economic and fiscal update, annual accounts, reports on any potential deviations from fiscal responsibility requirements, and the Government’s fiscal adjustment plan in response to deviations.” With Caribbean countries emerging as “the latest frontier” for fiscal councils, the IDB report said The Bahamas and other nations needed to “tailor their institutions to the specific characteristics and needs of their countries” given their vulnerability to natural
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