Ending more than a month of speculation, Minister of State for Finance Michael Halkitis has confirmed that former Central Bank Governor James Smith will head the board of directors of Bahamas Resolve Ltd. (Resolve), and that Deloitte and Touche has been appointed to go after the $100 million in bad debt that makes up the company's portfolio.
Guardian Business previously reported that Smith had been shortlisted for the post.
Resolve was formed on October 31, 2014. The company was formed for the express purpose of relieving Bank of The Bahamas of a crippling $100 million in non-performing commercial loans. At the press conference announcing the formation of the company, Halkitis and Prime Minister Perry Christie said an accounting firm with experience in collection of non-performing commercial loans would be named the following week, as would the management of the company.
In the time since, the government had -- until Halkitis addressed the matter in the House of Assembly yesterday -- been silent on the matter, despite Christie's promise of "transparency".
Halkitis explained the government's thinking to members of Parliament.
"The mandate for Resolve is that it must operate at arms length from the government and go out and collect the loans that it has acquired," Halkitis said. "With the almost singular purpose of Resolve, we are convinced that it will be successful at collections, given the more varied operational issues to which the management of the Bank of The Bahamas must devote itself."
"The collection and management of the Resolve portfolio is being contracted out to the accounting firm Deloitte and Touche. Resolve itself will have in place a Board of Directors headed by James Smith, former Central Bank governor, and former minister of state for finance," Halkitis announced.
"We are confident that this combination of the board and portfolio manager will allow Resolve to maximize its collection on the portfolio of assets over which it has taken charge," he said.
The minister did not identify any other members of the board.
Halkitis explained that as payment to Bank of The Bahamas for the loan portfolio, Resolve issued the bank "a $100 million promisory note."
"The note -- which has a maturity of up to ten years -- pays interest at a rate of prime less one half percent, or 4.25 percent in today's terms. The promisory note is also backed by a letter of comfort from the government," he reported.
This exchange of assets allowed the Bank of The Bahamas to reverse $49 million in loan loss provisions. Loan loss provisions are the funds set aside by banks to cover outstanding loans: these are funds that are then taken out of the bank's lending capital. With the exchange of assets, the Bank of The Bahamas' capital ratios at the end of October were subsequently within the regulatory limits established by the Central Bank.
"Now, as majority shareholder, we have charged the leadership of the bank with developing a plan to steer the bank in a new strategic direction. We are giving close attention to bolstering the capital position even further, and to how other strategic reforms can be launched, for which we will provide further updates to this House in coming days," Halkitis said.

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