– governor cites management issues
The Bank of Guyana (BoG) has already taken steps to bring the New Building Society (NBS) under its direct supervision, even as some “management issues” have been found, Central Bank Governor Lawrence Williams has said.
According to him, the action taken by the BoG has been endorsed by the authorities and the necessary legislative changes to give effect to a prudent regulatory regime are being drafted.
Williams made these statements in a letter addressed to Cyril Walker, Chairman of the Concerned Members of the NBS, in response to concerns raised recently by that group.
In a letter dated on April 17, the group through its chairman, raised concerns about the NBS not being licensed under Section 3 (2) of the Financial Institutions Act, which would have placed the Society under the supervision of the BoG and suggested that the NBS had taken advantage of this. The group said: “taking advantage of this failure to register, the society has been conducting its affairs in a manner that we consider dangerous to the members and the financial sector generally.” The group cited the example of the society’s $1.5 billion purchase of bonds in the Berbice Bridge Company from the financially troubled CLICO company. It said that such a purchase is “inconsistent with the Single Borrower Limit of the FIA but pointed out that “it may have been done in a manner that could be deemed inconsistent with the NBS Act and Rules.”
Williams stated in the letter that “until such time as the legislative changes are enacted, the bank will continue to engage the NBS on general issues of safety and soundness through authorized inspections and offsite surveillance.”
The governor also noted that “it is important to note that the bank has conducted several inspections of NBS upon the authorization of the Finance Minister Dr Ashni Singh in keeping with the NBS Act”. According to him, “the last such inspection was as at May 31, 2007. Following every inspection, the findings have been communicated to Dr Singh and the Chairman of the Board of Directors of the NBS. The findings of the inspections point to a healthy mortgage portfolio and general compliance with the NBS Act notwithstanding some management issues.”
Williams also acknowledged several concerns mentioned in the letter, and promised that “at the appropriate time [he] will raise those that merit attention with the management of the NBS”.
Walker in his correspondence had also raised the issue about the absence of an accountant on the NBS Board and pointed out the absence of a governance committee in the society.
Concerns were raised about the resignation of Clement De Nobrega, a professionally qualified accountant, who was elected as a director in April 2008. According to the group he resigned some five months later, apparently dissatisfied with the way the board conducted the business of the society.
The group had raised concerns about the manner in which the NBS was being managed and travelled to the company’s Annual General Meeting held last Saturday at the Cotton Tree Primary School in Berbice to voice its concerns.
It was successful in getting the society’s Board of Directors to agree to limit the new proposed lending ceiling to $12 million; set up a loans sub-committee and liquidate its pounds sterling investment so that it may be reinvested in an aligned currency.
One of the agenda items at the AGM was a resolution to raise the NBS’s loans ceiling from $10 million to $12 million or such other sum as may be approved by the board. The concerned members objected to any increase beyond $12 million as it would be unusual to endow such unprecedented power on the board and noting that in all financial institutions there are prescribed limits at various levels of authority. The directors supported the amendment by the concerned members that the loan ceiling be raised from $10 million to $12 million, pending approval of the minister of finance.
In addition, the board and the meeting agreed that a loan sub-committee shall be set up.
