PC banks worries worsen - Shaw demands auditor general's intervention as non-performing loans skyrocket

The Development Bank of Jamaica (DBJ) has written off more than $1 billion in loans to National People's Co-operative Bank (NPCB), which could lose its operating licence by August 5.

The write-off by the DBJ is being maintained on the books of the NPCB as an asset without which it would be bankrupt. But that has not satisfied the Department of Cooperatives and Friendly Societies, which has indicated that it could shut down the bank unless measures are taken to fix major problems within three months.

"The grounds for such proposed cancelling are that the NPCB is conducting its financial affairs and management in an unsatisfactory manner, which has now impaired its ability to ... ensure the safety and soundness of members' deposit ...," sources told The Sunday Gleaner.

non-performing loans

According to the sources, the NPCB's books reflected non-performing loans of $779 million in 2013. This represents a massive jump of 311 per cent when compared to the $189.5 million recorded in 2010. Figures for 2014 are not yet available.

But the jump in non-performing loans has pushed the DBJ into a decision to cease monitoring the Agricultural Credit Board which regulates the NPCB.

According to the sources, without the oversight from DBJ, the NPCB has been "operating banks with open doors to the vault", with non-performing loans to some senior members of the bank totalling almost $250 million at February 16 of this year.

Of this amount, almost $90 million is principal and interest. According to the sources, loans to these senior members were being rescheduled as soon as they became delinquent.

"By way of letters issued in April and October last year, the AC Board issued several directives relating to delinquent loans which to date have not been adopted by the NPCB," added the source.

The matter has sparked the interest of opposition spokesman on finance, Audley Shaw, who wants Auditor General Pamela Monroe Ellis to probe the matter.

call for investigation

"I am seriously questioning the decision of the DBJ to cease monitoring the NPCB. It was a bad decision by the DBJ and a retrograde step which has now resulted in the perilous state of affairs that apparently exist at the PC bank," Shaw told The Sunday Gleaner.

"I am therefore repeating my call for an urgent investigation by the auditor general of Jamaica and the Ministry of Finance, and further, as an interim urgent measure, I am proposing that the DBJ immediately resumes its monitoring of the NCPB in the interest of the farmers of Jamaica," declared Shaw.

He argued that NPCB is too important an institution to the people of Jamaica that it should be closed down because of the reckless mismanagement of the organisation.

Shaw is being supported by a senior technocrat who asked not to be named.

"The PC banks can only get money from the DBJ so it is incomprehensible why DBJ board would take a decision to cease monitoring the AC Board, to make sure that the PC banks are in a position to repay the loans.

"Someone at DBJ should be held responsible," argued the technocrat.

"If it was their money they would not do that. Well, see it deh now," added the source.

Efforts to get an update from managing director of the DBJ, Milverton Reynolds, were unsuccessful last week, but the bank has promised answers this week.

"Many of the questions which you posed require some amount of research which we will not be able to complete before Monday, so we will not be able to send you the responses as requested," said the DBJ's communication and marketing division.

However, Donovan Stanberry, permanent secretary in the Ministry of Agriculture, confirmed that a meeting was held with representatives of the NPCB and the AC Board recently.

"I can confirm that a meeting was held, but I can say nothing more," said Stanberry.

Our news team was unsuccessful in efforts to get a comment from officials of the NPCB.