By Morrison O.G. Sayon
The Management of the Liberian Bank for Development and Investment (LBDI) says its attention has been drawn to publications in the Monday, January 13, 2014 editions of the News and Concord Times Newspapers under the captions “ Near Insolvency: Serious Financial Crisis Hits LBDI’ and “LBDI on verge of Insolvency?” respectively.
Addressing a major news conference yesterday in Monrovia, the President of LBDI, John B.S. Davies, said the articles with numerous paragraphs verbatim appeared to have planted adverts loaded with a barrage of misinformation intended to cause panic and create confidence crises by causing a run on the Bank.
Mr. Davies said the actions by detractors of the Bank also undermine the stability of the banking sector as well as the hard earned progress made in the sector to date.
“The Board of Directors, Management and Staff of the Bank wish to assure shareholders, customers, investors, and the public at large that the Bank remains strong, viable and solvent and is in compliant with the requisite financial soundness indicators governing banking in Liberia,” the LBDI President noted.
Setting the record straight, the LBDI boss said under the principle of balanced reporting and professional journalism, the two papers failed to contact the Management of the Bank to ascertain the facts on the information published.
“What is even more disturbing is the inability of the papers to take note of the financial soundness indicators returns of the Central Bank of Liberia which are available and speak to insolvency of any bank,” Davies in strong words stated.
Mr. Davies said in banking terms, a bank is insolvent when it can no longer meet its financial obligations with its depositors or lenders as payment becomes due; adding, “But this is not the case with the LBDI as the articles tend to suggest.”
Providing clarity on the financial soundness of the Bank considering regulatory indicators, Davies said as of December 31, 2013, the bank’s minimum reserve holding at the Central Bank of Liberia was US$23.71M and L$1.29B.
He added that the minimum liquidity ratio set by the CBL is 15%. “LBDI liquidity ratio as at December 31 is 47% and reflects a liquidity surplus of 32%,” he intimated.
According to Mr. Davies, the CBL Capital Adequacy Ratio (CAR) requirement is 10% adding that the CAR of LBDI is 19% and is 9% in excess of the minimal capital requirement.
He also clarified that LBDI on shore and off shore cash position as at December 31, 2013 is US$53. 5M while the bank’s balance sheet grew by 17%.
He said in the writer(s’), flawed understanding of the relationship between the LBDI and the regulator (CBL), they incorrectly suggested that the 1OM USD placement done by the CBL to stimulate the home mortgage sector was meant to rescue the Bank from liquidity problems. But Davies further clarified that the writers failed to note or chose to ignore the facts that LBDI Cash balances were in excess of USD40 million at the time of the initiation of the mortgage stimulus.
The LBDI boss pointed out that given the long term nature of the resources required for financing mortgages and the fact that LBDI resources (deposits) are short term, the Central Bank’s intervention to provide a stimulus for mortgage lending was prudent and necessary.
He, among other things concluded that LBDI as the Lead Development Finance Institution of the Country has the fiduciary role of mobilizing resources for development of strategic sectors to create jobs, reduce unemployment, provide bridge financing arrangements for implementation of publicly funded construction projects among others.