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by pltm
(PLTM) - The government issued a statement around 9:30 pm last evening, Thursday, October 27, assuring the public that the concerns raised by the Financial Services Commission (FSC) over the survivability of the government-owned National Bank of the Virgin Islands (NBVI), have since been addressed.
As reported yesterday, information reaching BVI Platinum News is that the FSC raised major concerns over the functioning of the National Bank, so much so that the commission has questioned, among many other actions, whether the bank should be sold.
"We refer to reports in online media that the Financial Services Commission has concerns in respect to the survivability of the National Bank of the Virgin Islands," government said in a statement.
"While it is indeed fact that the Financial Services Commission did have some concerns in respect to the size of the non-performing loan portfolio of the bank, these concerns were addressed immediately by the bank in consultation with Central Government and the Financial Services commission (FSC) itself," government stated.
Further, government said that its position is that the regulator of the bank (the Financial Services Commission) must vigorously point out any deficiencies that the bank may have in order to protect its stakeholders and continue to be heartened by its objectivity and professionalism in regulating the entire banking industry in the BVI.
"The National Bank of the Virgin Islands has thus far demonstrated a proactive and firm commitment to addressing any concerns voiced by the commission, and has been fully supported and facilitated by Central Government in doing so," government said.
"We are pleased with the significant progress that the bank has made in improving its operations and regulatory standards in the last few years and remain confident in its sustainability, strength and continued relevance to the BVI community into the future."
Previous Article Published October 27, 2016 - National Bank In Major Trouble? FSC Raises Red Flag
Major concerns have been raised by the Financial Service Commission (FSC) over the functioning of the National Bank of the Virgin Islands (NBVI), so much so that the commission has questioned, among many other actions, whether the bank should be sold.
In a letter sent to Financial Secretary Mr. Neil Smith by Deputy Managing Director, Mr. Kenneth B. Baker, Regulation, the main issue stems from the Non-Performing Loan Portfolio (NPL) at the government-owned institution.
According to information, in the letter sent earlier this year, the FSC stated that it has been monitoring the Non-Performing Loan Portfolio of the National Bank of the Virgin Islands, which when expressed as a ratio (non-performing loans/total capital), is in excess of 100 percent of total capital. Furthermore, the non-performing loans as a percentage of total loans is currently in excess of 20 percent.
"The BVI banking sector has historically averaged around 3 percent, so clearly, the bank is well in excess of the historical average," the regulator (FSC) said about the bank, whose shareholder is the government.
To this end, the commission compiled several options which could be applied to address the chronic non-performing loan problem, including that the commission could allow the shareholder to bring in new shareholders and additional capital through a partial or full sale of the bank.
"The commission could ask the bank to voluntarily suspend the granting of new loans until the NPL is reduced to an acceptable level. This option would take several years to achieve the desired result."
Further, it stated that the commission could take enforcement action and prohibit the bank from granting new loans until the NPL is reduced to an acceptable level.
Also, the commission could take enforcement action to suspend or revoke the bank's license because the bank is likely to pose significant regulatory risk to the banking system and the bank may not be operating in the public interest.
Baker, BVI Platinum News understands, stated 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 commission has several obligations in accordance with the provisions of the Financial Services Commission Act and the international standards, Basel Core Principles, to take supervisory action to protect the integrity of the banking system," the letter to the Financial Secretary stated.
The FS was told that consequently, the shareholder is required to show cause (a reasonable explanation) why the commission should not take supervisory action, including one or more of the options outlined to reduce the regulatory or systemic risk posed by the bank to the banking system.
The commission required the shareholder's response within a certain time frame, failing which, the commission stated that it take enforcement action without further notification to the shareholder.
The FSC urged Mr. Smith to share the correspondence with Premier and Finance Minister, Hon. Dr. Orlando Smith.
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