In light of revelations made by The Tribune last week about the Central Bank's long-held concerns about Bank of The Bahamas (BOB), new demands are coming for a complete overhaul of the bank's management to restore confidence in the institution.
The revelations also raise questions about why strong action was not taken earlier to safeguard the public interest.
After reading the report about the letter, former Free National Movement (FNM) Chairman Darron Cash told National Review it would be both "vulgar and obscene" for the leaders of the current board and the senior management team led by Paul McWeeney to stand before the shareholders at any forthcoming AGM.
Tribune Business reported that the Central Bank first raised the alarm over Bank of The Bahamas' "very weak" commercial loan portfolio almost two years ago.
The regulator slammed "all facets of its credit risk management processes" as "unsatisfactory".
Among other things, Central Bank examiners identified "imprudent credit approval decisions for certain" politically-exposed persons (PEPs) and related party transactions, according to the newspaper.
The governor said the examiners were "unable to satisfy themselves" that these loans had been granted on a "consistent arm's length basis".
The Tribune article continued that Bank of The Bahamas also failed to provide examiners with a full list of PEP-related party loans, and the governor said such advances had already -- and would continue -- to result in credit write-offs to the tune of "millions of dollars".
The revelations came just over a month after the government announced a bailout for the institution.
While it still has not provided key details, the government announced on October 31 that it has established a new company -- Resolve -- that has absorbed $100 million worth of the bank's troubled commercial loans.
The Central Bank letter disclosed that a November 12-20, 2012 examination by Central Bank inspectors found "that a large measure of the basic tenets of industry sound credit practices are either missing, not evident, or compromised within" Bank of The Bahamas' credit processes.
Cash blew the whistle on Bank of The Bahamas repeatedly this year.
But such alarm was met by repeated assurances from the prime minister and the bank that all was well.
In the most significant distraction in the whole debacle, police seized Cash's laptops and cell phones on May 1 as a part of a probe into what the bank said was a leak of confidential information.
Nothing ever came of it.
The focus is now on what went wrong at BOB and what is being done to restore confidence in the institution.
No amount of statements and reassurances from the bank or from the prime minister have yet restored this needed confidence.
The governor's letter reflects just how serious and long-standing the regulator's concerns were.
In a statement to National Review, Cash said when "grotesque" failures resulted in the Bahamian people being on the hook for over $100 million, there is absolutely no way that the leaders who oversaw such "systematic institutional failure" should be permitted to be associated with Bank of The Bahamas.
"In the eyes of decent, well-thinking people, it would be nothing short of a disgrace for these people to be permitted to stand before the shareholders of that company and do anything other than explain themselves and announce their immediate resignations."
He added, "Now that we as shareholders of BOB know more about what the board knew and how disgracefully they failed in their duties, there is no way they can stand before the shareholders and open their mouths. They all lack the moral authority to come before the shareholders."
Cash noted that almost a year ago he wrote to FNM Shadow Minister of Finance Peter Turnquest suggesting that a parliamentary select committee was needed to examine all matters of BOB's operations.
"No action was taken," he said.
"Perhaps now that the bottom has fallen out, my request will get some meaningful consideration."

Trust
Again, we find it difficult to see how BOB's officials can manage from a position of trust.
As we stated in this space before, with trust in the bank clearly eroded, there is a need for stronger action and greater transparency to restore faith in the Bank of The Bahamas.
During the bailout announcement in October, Prime Minister Perry Christie advised that Bank of The Bahamas' board of directors has been directed to assess its management and cost structure and to submit recommendations to the government, as the majority shareholder, for management and administrative reorganization, before the end of 2014.
In a statement last week, BOB's Chairman Richard Demeritte said the bank has already commenced a reorganization of its internal structure and has also committed to report to government and the Central Bank recommendations for further enhancements by the end of the year.
Demeritte said, "These steps, along with new programs and services the bank will be offering, will enhance shareholder value, allow the bank to return to profitability and sustain further growth."
Meanwhile, the prime minister is having a hard time convincing the public about his government's commitment to transparency in the BOB affair.
Making an attempt to do so, he said last week, "Whatever we are doing, we are going to have to account to the Bahamian public for it.
"We did it in a very public way by saying this was done to aid the Bank of The Bahamas; that's done. With respect to that money, we are hiring an accounting firm to manage Resolve (the incorporated collection company), that (accounting) firm has been identified.
"I have had a meeting with one of the partners of the firm... I have given the directions that I would wish to give as the government on how we would wish this to be done in the best interest of the Bahamian people.
"I expect then to review reports that have been done; I expect them to get going and I expect to come to the Bahamian people on what will be happening with the company Resolve."
On the issue of the board of directors for Resolve, he said, "Significant Bahamian personalities [have been identified who] will be respected by the country upon their agreeing to be directors of Resolve, and so with the appointment of directors people will see that this is a part of steps we are taking to ensure that not only the Bank of The Bahamas goes on to make a profit, and that's going to happen, [but] also, that we will take that $100 million and find a way to get a lot of it back for the country."

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