Bahamas Chamber of Commerce and Employers Confederation (BCCEC) Chairman Gowon Bowe has stated that the recent Bank of The Bahamas (BOB) "bailout" could have "broad ramifications" for the country if not handled effectively.
Bowe told Guardian Business that the restructuring of BOB, which resulted in the government transferring $100 million of "bad" debt to new government entity Bahamas Resolve Ltd., revealed some weaknesses in the system.
"From the chamber's perspective, this is something that highlights the need for a fiscal responsibility act. The Bank of The Bahamas situation is certainly going to be a learning experience for the country, because it has very broad ramifications," said Bowe.
The government effectively issued $100 million in bad loans to Bahamas Resolve, which is owned by BOB's existing shareholders. The loans are currently valued at $45 million, based on their book value.
"If it is dealt with in a positive manner and has strong resolution, it will bode well for our ability to deal with other circumstances that will naturally come about.
"But if it's not dealt with in a very effective manner, unfortunately this could have very broad ramifications for the country and for the whole concept of Bahamianization, entrepreneurship and accountability," stated Bowe.
BOB's loan loss provisions resulted in the bank losing $66 million for the fiscal year ending June 30, 2014.
Credit ratings agency Standard and Poor's (S&P) yesterday issued a report stating that the "bailout" was "symptomatic" of the country's "little to no growth" since the 2008 recession.
While the report notes that BOB's performance was not representative of the local banking system, it highlights the high rate of nonperforming loans, which came in at 17 percent.
Bowe noted that Bahamas Resolve faces considerable difficulty collecting from its troubled commercial assets.
"If these are loans or businesses that are either defunct or are now no longer in operation, the ability to collect is really going to be limited to the actual collateral that's available and any personal guarantees that are issued by individuals, which is going to be very challenging," said Bowe.

Click here to read more at The Nassau Guardian