Archive for November 26th, 2013
Development bank faces trouble with serious debt
(CNS): The government-owned bank, which was created in 2002 to support entrepreneurship, economic and social development through loans, equity financing and other assistance, has a $30 million debt, which is due to be paid off in 2015. The financial services minister has raised his concern that this significant debt presents a challenge to the Cayman Islands Development Bank’s future ability to fulfill its mandate. The bank's 2012 financial statements, laid in the Legislative Assembly by Wayne Panton, who now has responsibility for the CIDB, showed that the bank had madea loan in contravention of its own law to a relative of an MLA in 2009, which was not addressed for more than 18 months.
Speaking in the House last week, Panton said that a way to address this debt problem needed to be found soon as the date for pay-back is looming and government is the bank's guarantor. In addition to the liability to CIG if the bank cannot find new funding, it will not be able to assist in financing government initiatives.
The outstanding debt owed by the bank is in three different special bonds, where the repayment comes due in one lump sum on a set date and the bulk of the bank's more than $35 million debt is due on three different dates in the middle of 2015. As a result, the bank will need to find the money to meet these payments or find a way to refinance the debt, which the minister said would be a challenge in this economic climate as the date was not so far away.
The bank's primary function is to lend money to local people for education, housing, agriculture and small businesses. At present the bank holds around $40 million worth of loans.
According to the financial statements, in September 2009 the bank granted a loan to a relative of an unnamed member of the Legislative Assembly in contravention of the development bank law for $30,000. Some 18 months after the fact, in March 2011 the board of directors ordered that the loan be moved and it was reportedly transferred to another bank in December of that year.
As he presented the bank's financial statements for the last financial year, posted below, the minister pointed to the progress the CIDB had made on the backlog of its financial statements and improvements in the human resources at the bank, as well as the documentation of procedures.