The Central Bank of Liberia (CBL) has strongly defended the financial soundness of the Liberian Bank for Development and Investment (LBDI) dispelling media reports that LBDI is nearing insolvency. In a statement issued on Tuesday, January 14, the CBL informed the public that LBDI is liquid, solvent and financially sound.
The CBL expressed serious concern over the story carried on the front page of the News Newspaper and the Concord Times alleging that LBDI is becoming insolvent. The CBL described the publication in the two journals as a mere falsehood that is far from the truth.
“As part of the CBL’s regulatory requirements,” the CBL explained “LBDI, like other banks in Liberia, publishes its financial statements on a quarterly basis in the local dailies.” According to the CBL, the publication of these financial statements is a manifestation of transparency and information disclosure, which is a requirement under the new Financial Institution Act of 1999 and the International Financial Reporting Standards (IFRS) adopted by the CBL.
The CBL noted that its financial soundness indicators show that LBDI’s liquidity ratio is 47%, which is 32% above the minimum 15% prudential requirement. The CBL disclosed that the current capital adequacy ratio (CAR) of LBDI is 19%, which is 9% above the minimum capital requirement.
The CBL also disclosed that LBDI’s reserves with the CBL collectively are more than US$40 million. “Against this background,” the CBL noted “it is quite obvious that the story about the government of Liberia (GOL) writing the CBL to loan LBDI US$7.5 million is untrue, baseless, and malicious.”
Being the regulator of banks and non-bank financial institutions, the CBL intoned that it has been robust in the examination of financial institutions, using risk-based supervision as one of its key tools.
The Central Bank noted that it has son-site examiners that conduct examination of financial institutions on routine basis, and respond to early warning signals from any bank.
“There is also an off-site surveillance team that analyses various financial reports submitted at different intervals to the CBL,” the Central Bank stressed. The CBL has meanwhile made it emphatically clear that it has at its disposal the requisite resources, which, in its capacity as the lender of last resort, could provide a cushion for any bank should there be a liquidity crisis.
LBDI president and CEO John B. S. Davies, III described the publication in the two journals as “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 told a crowded news conference on Tuesday that LBDI is considering commencing a legal process against the two papers. He, however, clarified that the Bank’s Management will first meet with the Management of the two media institutions in order to ascertain the motives behind the publication.
LBDI was created by an Act of the National Legislature in 1961 under the joint initiative of the Liberian government and major international financial institutions who purchased equity in the Bank namely: International Financial Corporation (IFC), Commonwealth Development Corporation (CDC) Capital Partners, European Investment Bank (EIB), Groupe Agence Franicais de Development (GAFD), and Deutsche Investitions-und Entwicklungesllchaft (DEG), over 150 private Liberians, other international and local institutions. Foreign shareholding is 44.47% and local shareholding is 55.53%.
LBDI is predominantly a privately owned institution under private management and a Board of Directors elected annually by its Shareholders.
The Bank commenced operations in 1965 as Liberian Bank for Industrial Development and Investment. Under an amendment in 1974, the name was changed to the Liberian Bank for Development & Investment (LBDI). A further amendment in 1988 allowed the Bank to engage in hybrid banking (commercial and development banking activities), to compliment its development objectives.