Rokel Commercial Bank (RCB) has posted an impressive turnaround from a massive loss of over a hundred billion Leones in 2013 to a profit of Le1.5 billion three years later in 2016.
This does not however tell the entire story.
RCB failed to meet four key provisions of the Banking Act. These are the single obligor limit; aggregate exposure limit; local liquid asset ratio and capital adequacy for which there is still a deficiency.
The single obligor limit is the maximum amount banks can lend to a borrower and it is pegged to the capital base of each bank. According to the Auditors RCB consistently breached this condition for all significant customers.
The local liquid assets ratio which the prudential guidelines for commercial banks put at a statutory minimum of 75% was breached because RCBs liquid asset ration as at December 2015 was 66.6%.
The statutory minimum of 30 billion Leones was also breached as the net equity of the bank was recorded as Le0.185 billion.
The non loans to total loans ratio of 74% “exceeded the tolerable ratio of 10% by 64%.
The oversight committee set up a special debt recovery committee. This was because as at 31st December 2013 “bad and doubtful debts totalling Le144.34billion, only Le8.06billion had been recovered up to March 2016.”
The current Managing Director was bold enough to explain to shareholders that a good number of the loans were not backed by collateral. He furthered that even in cases where there was collateral it involves a long process which involves the courts and those cases run for years before they are allowed to sell. He also mentioned that they have quite a number of property they want to sell but there are no buyers.
So even though the Bank is not out of the woods yet he was hopeful that shareholders would begin to get dividend again by next year.
Monday March 13, 2017