POB’s banking practices - Solomon Star News

POB’s banking practices

02 September 2014

Dear Editor – I wish to reply to the comments made by the Central Bank of Solomon Islands, John Diau and the recent comments made by Aljen Ijini Tingulu in the Solomon Star issue No.5600, 26 August 2014.

What I saw with the responses by the Bank and these two gentlemen was the fact that they do not answer the question I was asking and will continue to ask.

What I was asking is not about the process of applying for and granting of the license by the Central Bank but more on the practices adopted by the POB.

The three parties need to know that what is important is the safety and soundness of the financial system because any problems affecting the POB, especially with its risky lending practices will have an effect on the whole financial system.

POB has no roots anywhere in the world. Some global banks have failed during the recent financial crisis in 2009 as a result of risky lending.

What Messrs. Diau and Tingulu, need to understand is that banks are intermediaries between the depositors and borrowers.

They lend money which belongs to depositors to borrowers. It is therefore important that they do not do risky lending of what is not borrowers money.

So to praise POB for applying intrusive and risky lending practices merely to those who will not repay their loans is risky to the financial system and economy of Solomon Islands.

What POB is doing now is they don’t care about serviceability of the loan but they give out loans as long as an applicant provides 2/3 NPF pledge.

You need not look far but see the SINPF loan to Tavanipupu Resort which I highlighted earlier in the week.

The loan is now hotly debated by Parliament because Tavanipupu owners failed to repay the loan and SINPF will lose money on this loan.

For your information, established banks follow acceptable lending policies and will not give money to those who are unable to repay their loans.  The practice that they approve loans to clients with new accounts is risky.

I must reiterate that there is no bank in the world which will give out any loans as soon as you open a new account. Don’t know if this is okay with CBSI as the regulator.

To me, what I am asking as a businessman and depositor in the banks system is how safe is the practices currently adopted by POB.

To applaud POB for giving loans to those who are referred to as poor is dangerous and I don’t want to see a lot of people losing their NPF contributions and worst, POB having to pull funds from elsewhere if most of its clients are not repaying their loan and are not allowed to apply for new loans.

POB will have problems because they will not get new income from interest anywhere because most of its borrowers have defaulted.

To my two friends Messrs. Diau and Tingulu, don’t be confused with what POB is doing now with what should be acceptable minimum lending requirements.

There is no cheap money and you need to work hard and prove yourself bankable before you are able to borrow depositor’s money which is kept by commercial banks as custodians.

The other three banks could have adopted what POB is doing if they think it is safe and beneficial to the financial system and economy of Solomon Islands. Don’t know whose interest is CBSI serving as a regulator.

I will still maintain my call for CBSI to scrutinise the practices done by POB.

Peterson Boso