Call to strengthen Building and Loan Association

The Ministry of Finance economist who last week asked if the Building and Loan Association was “on the brink of collapse” has postponed “further newspaper commentary” on the financial institution.{{more}}

R. T. Luke V. Browne, who was a Unity Labour Party candidate in the 2010 general election, in a letter in The Vincentian newspaper on Friday, said the Financial Services Authority (FSA) “must act now to protect thousands of investors”.

He expressed concern about “governance and financial problems” at Building and Loan and said he would this week talk about “two directors who set up a private company to which millions of dollars worth of Building and Loan assets are being transferred”.

But Browne said in a statement on Wednesday that he has put his commentary on hold “pending the outcome of ongoing investigations by the Financial Services Authority and other interested parties.

“Please be assured that I remain committed to the pursuit of positive changes through all avenues where this corporation is concerned. It is important for the assets of shareholders and clients to be safeguarded,” he said in the statement sent to SEARCHLIGHT (see page 3).

Meanwhile, the FSA, which regulates all non-banking financial institutions here, said in a public information publication in today’s SEARCHLIGHT, that since 2010, Building and Loan entered an agreement with the Ministry of Finance with assistance of the World Bank “to introduce measures to strengthen the overall condition of the institution.

“The resulting Plan of Action carries forward in 2013 and with further assistance from the World Bank and close oversight of the FSA. The FSA is satisfied with this ongoing work,” the FSA said in the public information notice.

It was not immediately clear whether the FSA’s statement, which was part of a larger publication (see Page 19), in any way resulted from Browne’s comments.

Further, Building and Loan, in a press release on Wednesday, said its directors, management, and staff “are cognizant of their responsibilities and assure members that their deposits are safe”.

Building and Loan, in its press release, did not mention Browne’s letter, but seemed to attempt to address some of the issues he raised.

Browne, in his letter, said Building and Loan’s directors and management “cannot reasonably expect to conduct business as usual without adhering to the statutory guidelines, fulfilling their reporting obligations and meeting accountability standards”.

He spoke of “record keeping practices from the Flintstones age” and said Building and Loan’s $50-a-year death benefit plan is “a desperate attempt to raise funds”.

He further said there is “reason to question the CEO’s financial and managerial competence…. “The men and women put in charge have flaunted their responsibilities, and must be held accountable for the millions of dollars that were placed in their care,” Browne said in his letter.

“This is just the tip of the iceberg. There is a lot more to be said. Building and Loan has directors who have outlived their usefulness…,” Browne said.

But Building and Loan said in its release that the institution “continues to grow” and its management “continues to work diligently at reducing delinquency to acceptable levels.

“This task has been very challenging in light of some bad loans in the organization in the past and the effect of the global financial crisis.

“We have been able to contain the effects of these factors on the Association’s loan portfolio over the years, and have managed effectively the effects of the write down of our investments in British American Insurance Company Limited.

“This investment is now fully provided for and any future recovery will be recognised when received. Our investment in CLICO is also substantially provided for. Hence, there are no further write-offs that are likely to impede our efforts going forward,” the release said.

Building and Loan further said its management “continues to work closely with the Regulators to ensure compliance and adherence to the various statutory requirements.”

Browne in his letter said the Association was yet to submit its 2011 financial statements to the regulator and had failed to have an annual general meeting in 2012.

This, Browne said, “has done nothing to boost our confidence”.

But Building and Loan said the 2011, unaudited draft financial statements were submitted to the Regulators and 2012 versions “are in the process of completion”.

It said that due to delay with the full conversion of an updated computer system, the 2011 Audit was not completed in the usual time frame.

This resulted in the inability to host the annual meeting on time for 2011, the release said.

Arrangements are in place for the external auditors to commence the 2011 audit in the first week of February and the 2012 audit would be undertaken immediately after.

The annual meeting for the 2011 and 2012 financial years will be held before the end of June, the release said.

Building and Loan further said its leadership continues to ensure that there is a reasonable spread between its interest rates on loans and deposit rates, in order to ensure that there are adequate funds to finance the Association’s operating activities.

The release said there has been “no significant decline” in the value of mortgages held by Building and Loan and revaluations “are constantly done by qualified appraisers”.

It further said Building and Loan continues to honour its obligations to shareholders, creditors and other stakeholders and continues to look for ways “to improve efficiency and the quality of service to members…” (kentonchance@searchlight.vc)