Latest update February 4th, 2025 9:06 AM
Some general thoughts on GBTI’s approach to banking
Dear Editor,
The Guyana Bank for Trade and Industry recently held their 29th Annual General Meeting on May 22, 2017, and it can be described as unprecedented. The Chairman of the Board started the meeting in the role of a Pastor and invoked a Christian prayer. It seems to escape the Chairman that GBTI is a Public Company with over 1,800 Shareholders presenting a very diverse multi-religious grouping. The separation of religion from the institution and a secular environment was undermined. Unless of course, it was the intention to seek guidance from God in dealing with two humongous challenges that GBTI now faces.
As reported in the press, the Chairman assured the Shareholders that the Bank would recover the $941M lost in the recent fraud at GBTI. Industry knowledgeable persons have questioned this assertion by the Chairman and to put it mildly I believe the Chairman was overly optimistic. On the other hand, did the Chairman seek to mislead the shareholders? I hope not
GBTI has an insurance of US$2M (maximum) to cover frauds of this nature. However, is this fraud, or negligence or naivety? At this point in time there is no guarantee that the insurance company will pay on such a claim. The Government of Guyana has seized all known assets of the alleged perpetrator of this fraud in a separate case. The question for the Chairman — does he not owe the shareholders and the public an explanation of his bold assertion that GBTI will recover funds lost in the recent fraud?
I believe that it should be mandatory that in the interim report as at June 30th, 2017 that the Chairman makes a clear unambiguous statement confirming what amounts have actually been recovered at that point in time.
“Growth at an exceptional rate is a red flag in banking. It is hard enough to manage an ordinary bank; to control a sprouting weed is nigh impossible. If loans are expanding too quickly, the lending officers have probably been saying “yes” too frequently.”- James Grant. This is apt when one examines the phenomenal growth of GBTI’s loan portfolio over the last few years ($19.3B in 2010 to $45.5B in 2016). However, a study of GBTI’s annual account reveals a disturbing trend of a continuous deterioration in this lending.
The mantra that the economy is in decline cannot be used as an excuse for reckless decision making of the Executives involved in the Credit Administration of the Bank. The tools of risk management are wide and varied and credit risk analysis covers economic, business and political. For the Year ending 2016, GBTI Total Loans and Advances were $45.52B while the total impaired Loans and Advances was $11.80B. Included is these figures $8.88B that is past due 360 days and over. Renegotiated Loans and Overdraft was recorded at $6.09B. These figures clearly demonstrates that as at 2016, this is a frightening state of affairs that even at its most minimum GBTI’s loan portfolio is 25% bad.
Banks get in trouble for one basic reason, they give bad loans. In commercial banking, if you want to be outstanding, you first have to be the best in risk management and credit quality. Banks fail in vast majority of cases when their Management seeks growth at all cost, driven by profit with no regard to risk or gamble on the future.
Latchmi Devi Persaud
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