The Liberian Bank for Development and Investment (LBDI) has debunked media reports suggesting that it is nearing insolvency. In a statement issued in Monrovia late Monday evening, Jan. 13, the Bank’s Management said LBDI’s financial liquidity position is sound and vibrant.
“The financial soundness of LBDI is unquestionable,” said LBDI president &CEO John B.S. Davies, III.
Mr. Davies’ comments were in reaction to the Monday, January 13, 2014 editions of two local newspapers alleging that LBDI is nearing bankruptcy and that the Bank’s management has applied to the Central Bank of Liberia (CBL) for a bailout.
According to the two papers, LBDI customers are frequently concerned about transactions at the Bank and do not bother with the Bank’s real financial issues.
The papers also reported that LBDI has apparently been overwhelmed by borrowing, prompting fears that it might announce insolvency due to what they called “the failure of creditors including the government of Liberia, to meet their obligations to the Bank.”
The two papers named the government of Liberia as one of LBDI’s delinquent borrowers whose delinquency in repayment have stuck LBDI in a quagmire to pay millions of United Sates dollars it borrowed from LBDI.
Reacting to the allegation of LBDI’s insolvency, the CEO Mr. Davies described the publication as “a mere tabloid” intended to undermine the Bank’s growth trajectory. He observed the articles with numerous paragraphs of verbatim were planted adverts loaded with a barrage of misinformation intended to cause panic and create a crisis of confidence by causing a run on the Bank. “The action by detractors of the Bank also undermines the stability of the banking sector as well as the hard-earned progress made in the sector to date,” the LBDI CEO stated.
He assured shareholders, customers, investors, and the public at large that LBDI remains strong, viable and solvent and is compliant with the requisite financial soundness indicators governing banking in Liberia.
The LBDI boss particularly questioned the motives behind the publication as his office was not contacted before said publication by the two papers.
“Under the principle of balanced reporting and professional journalism, the two papers failed to contact the Management of LBDI 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 CBL which are available and speaks to insolvency of any bank,” Davies said in the statement.
He clarified that in banking terms, a bank is insolvent when it can no longer meet its financial obligations with its depositors or lenders as payment become due. “But this is not the case with LBDI as the articles tend to suggest,” Davies added.
Touching specifically on the financial soundness of LBDI, the CEO disclosed that as at December 31, 2013, LBDI’s minimum reserve holding at the CBL was US$23.71 million and L$1.29 billion.
According to him, the minimum liquidity ratio set by the CBL is 15%, but LBDI’s liquidity ratio as at December 31, 2013 was 47% and reflects a liquidity surplus of 32%.
Mr. Davies also clarified that the CBL’s capital adequacy ratio (CAR) requirement is 10%; but the CAR of LBDI is 19% and is 9% in excess of the minimal capital requirement. The LBDI boss declared that LBDI’s on shore and offshore cash position as at December 31, 2013 is US$53.5 million, while the Bank’s balance sheet grew by 17% last year.
“In the writers’ flawed understanding of the relationship between the LBDI and the regulator (CBL), they incorrectly suggested that the US$10 million placement done by the CBL to stimulate the home mortgage sector was meant to rescue the Bank from liquidity problems. But the writers failed to note that LBDI’s cash balances were in excess of US$40 million at the time of the initiation of the mortgage stimulus,” he explained.
He insisted that given the long term nature of the resources required for financing mortgages and fact that LBDI resources (deposits) are short term, the CBL intervention to provide a stimulus for mortgage lending was prudent and necessary.
Mr. Davies also insisted that as the lead development finance institution of Liberia, LBDI has the fiduciary role of mobilizing resources for development of strategic sectors to create jobs, reduce unemployment and to provide bridge financing arrangements for the implementation of publicly funded construction projects, amongst others.
Davies reassured the public including investors, depositors, shareholders, and other stakeholders that the Bank is sound financially and would continue to be vibrant.
“LBDI,” he said, “has been around for 49 years and it was here when literally every financial institution turned its back on Liberia and abandoned depositors in our desperate hours.”