‘Liquidity remains a paramount concern to the FSA’ – Astaphan

Members of the Financial Services Authority (FSA) working to put the Building and Loan Association (BLA) back together again, have a Humpty Dumpty task at hand.{{more}}

Deputy Assistant Director of the Authority Eleanor Astaphan said that since her institution took the reins of the Association, it has been difficult to determine the true financial condition of the Association, due to lack of internal controls, record-keeping and clear disregard of prudent business practices.

“The books and records of the Association have not been audited for over two years, neither have monthly financial statements been prepared for this period,” Astaphan said during a televised statement last week.

“So far, the FSA has been unable to locate any evidence that previous management prepared cash flow reports or liquidity analysis and management. Bank statements have not been reconciled for over a year, and there is no evidence to demonstrate that the Association prepared budgets, both for expenses and activities in the past,” she added.

“As of November 23, 2012, records indicate 422 loans were non performing, 222 of which were over 12 months past due.

“Past due loans total EC $79 million and comprise over 30 per cent of the total loan portfolio.

“Interest continued to be accrued on loans past due for more than 90 days, and as a consequence of that, income is being exaggerated; losses disguised.

“There were no adequate reserves for non performing loans, and in fact, provision for loan losses on delinquent loans was not being addressed at all. Loan valuation of properties was not being routinely performed.

Astaphan informed viewers that the FSA’s intervention has been a two-pronged one.

On one hand, the team was attending to management and control matters to ensure that the doors of the Association remained open, at the same time addressing the remedial actions which were to be taken.

She said that Authority has been trying to accommodate the Association’s depositors and creditors, while the process of getting the institution back on its feet continues.

“Liquidity remains a paramount concern to the FSA, as we manage the institution’s daily cash flows.

“The strongest of institutions cannot withstand a run of deposits and the Association in its present circumstances is no different.”

Astaphan said that there was an ongoing review of the institutions non-performing assets, with a view to a timely and responsible resolution, ensuring that it is done in a manner which does not adversely, or at all, affect the real estate market.

The FSA took management and control of the BLA on February 1, following a two-week run on the organization, on heels of the January 18 publication of a letter written by economist Luke Browne, which asked if the BLA was on the verge of collapse.(JJ)