By Allieu Sahid Tunkara
Defence counsel for persons of interest for the Commissions of Inquiry, presided over by Justice Biobele Georgewill, has questioned the regulatory and supervisory powers of the Bank of Sierra Leone (BSL).
The Bank’s effectiveness, in duly exercising its supervisory functions over the commercial banks, was brought into question during cross examination by defense counsel, Aminata Sillah.
Madam Sillah was cross examining the Director Of Supervision at the Bank of Sierra, Hanifa Addai, who had earlier told the Commission that her mandate involves supervising all the operations of commercial banks in the country.
Mrs. Addai disclosed that the Supervisory Department of the Bank derives its mandate from the Bank of Sierra Leone Act of 2011. The Department, according to the witness, has the primary responsibility of ensuring price and financial systems stability.
The Bank of Sierra Leone, the State witness continued, conducts such supervision as to ensure depositors’ funds are protected.
Responding on how the department carries out its supervisory functions, Addai explained that they are guided by the banking guidelines in monitoring and reviewing the activities of commercial banks in the country.
She emphasized that Commercial Banks must follow and comply with these guidelines in conducting their day to day transactions quite apart from the internal policies they also develop as part of their self regulation.
“Senior managers are expected to comply with the guidelines as well as policies generated by the Board of the Sierra Leone Commercial Bank,” the witness emphasized.
The BSL is also tasked by law to review the loan portfolios to see whether these policies have been complied with. In an event of non-compliance with the BSL guidelines in terms of the loan port folios, licences of defaulting banks could be withdrawn or the bank’s capital could be reduced to ensure compliance.
The BSL’s effectiveness in exercising its supervisory powers in the interest of the state was effectively challenged by counsel Sillah, who put it to the witness that there was an alarming rate of unsecured loans offered by the SLCB which have affected the capital base of the bank.
The BSL Supervision Director agreed with counsel that there was a huge pile of unsecured loans offered by SLCB at the expense of the bank’s existence.
Mrs. Addai continued her testimony insisting that the unsecured loans anomaly was discovered when the BSL conducted a periodic review in 2013. Following the discovery, the BSL promulgated remedial measures to save the SLCB, which was tinkering on the edge of financial implosion.
“The terrible state of the SLCB compelled the BSL to undertake radical measures to normalize the financial situation of the bank,’’ the witness recounted.
Some of these measures, Mrs. Addai explained, are the immediate dissolution of the SLCB Board of Directors. This was replaced with an oversight committee. Some of the measures also involve setting up a tripartite committee comprising the Ministry of Finance, National Commission for Privatization and the BSL to financially stabilize the bank.
The BSL also dispatched a team of banking experts to the SLCB to review the books of the SLCB and proffer advice where necessary. Owing to the gains made in terms of the financial stability of the bank, the contract for the team of banking experts was renewed for another two months and arrangements were made for enhanced supervision. Until 2018, the SLCB has not given out loans to politically exposed persons.
Defence counsel, Aminata Sillah, reminded the witness of section 35 of the Banking Act of 2011, which prohibits commercial banks, including SLCB, from giving out loans above the base capital of 10%. During the cross examination she also placed emphasis on the zero- tolerance audit requirement, which all commercial banks must comply with in their day-to-day banking transactions.
The Corporate Bank Lending Policy was also espoused by Counsel Sillah, which, according to her, was a policy generated by the SLCB. The Policy, according to Sillah, contained standards that should not be compromised and that sanctions were supposed to have been slammed against the SLCB to produce a restraining effect that can save the SLCB from its near collapse.
The Supervision Expert at the BSL explained that writing the loans off does not mean SLCB cannot go after the debtors, but it is just a convenient banking exercise to save the assets of the bank.
“Loans are written off if they are non-performing for a period of one year,” Mrs. Addai explained.
As the evidence unfolds in the Commissions, the SLCB still continues to offer loans. Showcasing its added regulatory powers, the Bankers’ bank came down very hard on all commercial banks in the country, including SLCB, by issuing freezing order on all individual accounts in their banks.
The temporal order was issued on 6th July 2018 and the order ceased on 2nd August 2018, which means the affected individuals still have access to their frozen accounts based on limits.
In a previous testimony conducted on 20th February this year before Justice Biobele Georgewill, the thorny issue of unsecured loans was brought to the fore by one of the witnesses, Mustaba, the Chief Risk Officer at the SLCB. He was called by counsel for the state, Oladipo Robin Mason.
Later several witnesses, including current and former Managing Directors of the bank, testified on the bad loans syndrome. The thread that can be seen in all the narrative surrounding the unsecured loans is that these loans are accessed mostly by politically exposed persons and their relatives. These exposed persons, witnesses told the court, can access the loans when necessary and that no policy or law exists that can bar the bank from giving out these loans.