By Tanu Jalloh
I read the exchange of perorations between the Public Relations Officer of the Bank of Sierra Leone, Beresford Taylor, and a private lawyer with a knack for financial matters, Francis Kaifala, on the ways banks have or have not operated around the festivities of December.
While Kaifala thinks the banks are perennially overwhelmed at this time of the year each year, and consequently account holders have a deuce of a time accessing their own hard earned money, Beresford argues that the central bank has undertaken extensive regulatory and prudential reforms towards strengthening the banking system and its operating environment. He also states regulation and risk management on those placards. Almost a year after I first raised that, I am still concerned about insecurity in the banks: the thrust of this article.
To start with, I agree with Kaifala on the fact that banks seem not to be able to deal with the surge in demand for liquid cash especially in December. I dealt with that same concern in December 2012 at the height of the country’s biggest liquidity crisis in many years (Politico, 2012: “http://politicosl.com/2012/03/the-liquidity-crisis-away-from-politics/”).
Back to my qualms with the issue of regulation and insecurity in the banking sector. Ideally, with banking regulations conformity is imperative, but with ethics all of them are conformable. This means in the absence of state regulation, ethical considerations must prevail in the conduct of banks and banking.
Insecurity is rife in the financial systems the world over. Even with the advent of technology and the speed with which servers in banking malls operate in big and sophisticated financial systems, dealing with problems of insecurity around the operations of banks and other financial institutions would hinge on the strength of the set of regulations that governs the industry.
Banks, the world over, have the tendency to cheat in their quest for profit maximization, falsify interest rates, and lie about their healthy financial standings or fake asset acquisition as collateral to regulatory bodies. While the situation may be festering in Sierra Leone, despite huge economic prospects and investor confidence, Nigeria has had its own share of poor banking regulations. The continent’s second largest economy, after South Africa, had its financial sector pruned and its aristocrats tamed, with 14 banks surviving the overhauling, by Central Bank Governor Mallam Sanusi Lamido Sanusi since 2009. He sent shockwaves through the corporate establishments, sacking the chiefs of eight of the banks and felling pillars of Nigeria’s financial aristocracy who had long seen themselves as beyond the reach of the regulators in doing so.
That was probably the saving grace for an oil producing economy that almost collapsed when the crunch struck in 2009. Like in Nigeria those fly-by-night banks could well be here in Sierra Leone here regulation is said to be weak. Such vulnerable openings encourage money laundering, counterfeiting and serious economic crimes. The proofs are in the courts with the ongoing litigation against a property Kabba Kallu and others.
In the United States of America and United Kingdom, for example, there are oversight bodies that ensure standard operational procedures with utmost respect for financial traditions or principles and transparent transactions – be they interbank or client-based. In other words, banks should not deal with one another often without letting the regulator know the extent or details of their transactions, or simply operating accounts on behalf of rogue business people. But where the foundation of banks is shaky and may crumble unless those banks lie about their financial and transactional health, independent regulatory bodies should be ready and able to come in and safeguard people’s savings. And where a parallel appraisal is lacking, banks would dissolve and leave in their wake a cataclysmic economic setback. This could even be more serious in countries like Sierra Leone. And here are my reasons.
In the third quarter of 2012 Standard Chartered Bank in New York, one of UK’s five largest, had a hell of a problem defending itself against allegations that it had hidden $250 billion in transactions tied to Iran. Some well over 60,000 transactions were said to have taken place between the bank and Iranian businesses. The US was concerned that such stealthy businesses were in fact scandalous and in breach of standard regulations. Standard Chartered Bank was fined US$ 340 million.
In recent months when several commercial banks entered into some insecure deals with rogue business people like Kabbah Kalu and many of his likes, it took the muckraker to expose that. Could it be that there were no prudential reforms at the time? The Bank of Sierra Leone could not, nonetheless, detect and contain such allegedly criminal financial transactions because it was far behind in terms of the technology to fathom and bust them and without the wherewithal to prevent them.
At one point in recent times, UK banks were guilty of manipulating the London interbank offered rate (LIBOR). That interest rate-rigging became a financial scandal of unbelievable proportions; 16 of the world’s largest banks at the time were said to have perpetrated the biggest fraud in banking history. Banks raised or lowered their rates to make their balance sheets appear healthier than they were, while consumers and members of the public apparently paid the shortfall. That had a ripple effect across the world. Therefore we have reasons to see multinational banks fall under strict regulations no matter where they are. Some of these banks, Barclays (until September 1999 when it became Rokel Commercial Bank) and Standard Chartered Bank, were and are operating in Sierra Leone where money laundering and interest-rate rigging cannot be easily detected.
Standard Chartered Bank is one of the three largest, and together with the Sierra Leone Commercial Bank and Rokel Commercial Bank, holds about 54% of the total assets in the banking industry. It is the biggest in terms of global profile and a readymade trajectory into the country’s economy straight from the securities exchange (stock market or stock exchange) in London and New York.
However, allegations are that the world’s largest banks, among them Standard Chartered Bank, have been fraudulently fixing interest rates around the world for at least the past decade. Despite the amended Bank of Sierra Leone Act, Banking Act, the Anti-Money Laundering and Countering the Financing of Terrorism Act, the Credit Reference Act (all passed into law in the past three years) and the new prudential guidelines issued by the Bank of Sierra Leone last year, I still see some susceptibilities of the banking sector to hazards with particular reference to fears around risk management, control and oversight, strength and preparedness of the central bank to provide adequate supervision.
The country’s situation in terms of capacity to regulate the banking industry or the financial services sector is at the mercy of the aristocrats – rogue businessmen who have the grace of the powers that be. Thus, there is what I call a serious transactional inequality with no equal access and reasonable conditions to loan facilities for small businesses; no congenial win-win interest rate pegging. All of these are a bane to the opening up of burgeoning local informal businesses in particular and the economy in general. Some of these concerns cannot be evaded in the search for answers to the current state of affairs of the country’s financial sector. Much as they look unsettling, revelations on weak and pliable banking regulations in Sierra Leone make up an integral part of the economic difficulties the country faces right now.
Here are some of the reasons for apprehensions: In late 2011 the “Stability Analysis Report on Sierra Leone’s Financial Sector” indicated that “the banking system was vulnerable to a certain level in all of the key areas of assessment and, therefore, had weaknesses.” As a consequence, between October and December 2011, this fear became a reality with liquidity crisis that has refused to go.
In fact in a July 2011 document titled: ‘Financial Sector Reform and Development in Sierra Leone,’ authored by Omotunde E. G. Johnson for the International Growth Centre (IGC), the pessimism was even justified. “Sierra Leone is at a very low level of financial development. It is a country of about six million people, with a per capita annual income currently around US$315. Sierra Leone currently has thirteen commercial banks, nine community banks…, two savings and loans…, and some forty-two foreign exchange bureaus,” according to the IGC, which is based at the London School of Economics and offers independent advice on economic growth to governments of developing countries.
Sierra Leone has a fairly liberalized financial system but interest rates and exchange rates are obviously market-determined. In other words, there are no selective credit controls.
“The soundness of the financial system is in some question, although it is not in any danger of crisis. The capital–asset ratio of the banks, for example, is good (about 17%), but non-performing loans are a problem, tending to hover around 16% in recent years,” the IGC observed. The report also found out that the state of banking supervision was rudimentary. Again the BSL’s supervisory efforts, capacity and capability are being questioned.
“One certainly does not see any attempt to explicitly organize the approach to assessing the soundness and management of a financial firm in light of risks and risk management. This would emphasize the importance of a clear understanding of financial risks and optimal assignment of the responsibility for managing different types of risk (namely, liquidity, credit, interest rate, market, foreign exchange, operational, sovereign, legal, and fraud risk),” said IGC. All in all, the regulatory strategy in Sierra Leone is in need of a focused, coherent, modern approach.
(C) Politico 21/11/13
STRONG HAND TACTICS TO REMOVE STRONGE FROM OFFICE
Our people in parliament have gone ahead and changed the 1991 constitution making it possible for someone without legal background to become Speaker of the House of Parliament of Sierra Leone for the first time since Siaka Stevens. The parliament ignored all cries in objection to their action. That something we are getting used to in these days of 4444. The overwhelming majority of the Red Movement in parliament backed by chiefs who we believe should not be in parliament is teaching the nation some serious and bitter lessons.
Conspiracy theorists are having a field day. Opposition parties plagued by unnecessary internal divisions have also suddenly sprung to the feet shouting foul. So what is going on?
There's no doubt that De Pa is acting in his own long-term interest and any suggestion that Red MPs simply went off on a tangent without the knowledge of De Pa to pilot this bill through parliament, is completely unthinkable. The majority of the people of this country have absolutely no idea where the Red Movement is taking this country because our MPs did not consult their people who sent them to Tower Hill on this constitutional amendment. But we are sure about a few issues.
1. The Red Movement, with the active support of all the chiefs in parliament and some opposition people for some reason we all understand these days in the land of De Pa, want Speaker Abel Stronge out of office immediately.
2. Speaker Stronge's strength of character and sense of patriotism and fairness fly in the face of the REAL POLITIK that many expected him to be involved in when they nominated him for the job in 2007.
3.There is a kind of urgency in the move to remove the Speaker and we must ask why. The same Red Movement has set up a Constitutional Review Committee (it doesn't meet often anyway) to review the same 1991 constitution. So we ask: why the rush to repeal just this provision?
The MPs say they are following best practice around the world. We've heard them. In our next edition we shall bring out a list of other international best practices they have ignored despite the cries of the people, as well as tell them the yardsticks civilised countries use in determining who gets elected to the legislature.
For now we believe Abel Stronge has nothing to lose. He has done his own bit and history will bear him out. He should just leave the place and let the MPs pick their man. We already know the next Speaker.
SIERRA LEONE BAR ASSOCIATION IN THE LION'S DEN
Look at what we have here: the Sierra Leone Bar Association has issued a rare press release attacking the Sierra Leone media. The Bar Association is our strategic partner so we find it strange that they could launch such vicious and groundless attack against a whole association because of the actions of a few, even if those few did anything wrong. That is very debatable at this stage. We welcome an open debate with the leaders of the Bar Association anywhere in Sierra Leone on the content of their press release.
The Bar Association knows we will respond. Respond, we will. We have collected all our facts and in the next edition of Politico, the nation will read our reply. Those who live in GLASS HOUSES SHOULD NOT THROW STONES.
ORBANGU WIDENS ATTACK ON POLICE HIGH COMMAND
Many people are very disappointed that the promised showdown between a radio-loving politician and a beleaguered police boss didn't happen after all. Francis Munu, the police boss facing tens of thousands of questions from his own people chickened out of the debate on a breakfast programme leaving the field open for Orbangu the politician to re-make his case with far more force and passion than he did on the first day. Munu now has no option but to fight back. His institution was badly bloodied on Tuesday.
Somehow the radio station allowed Orbangu to open up new battle fronts with the IG and his men. He went into welfare issues like the situation in police accommodation at Jui. He spoke about uniforms, boots, peace-keeping operations involving the police, purchase of arms and ammunition and so on and so forth.
Now when did Orbangu know all this? This is the problem with politicians. Orbangu had three or so of these badly paid and clad police officers securing his life since he entered politics in Sierra Leone. The barracks at Kingtom and Ross Road have been in very poor shape long before Orbangu returned home from Canada. These things are not new. And many people have been complaining. Where was Orbangu when the police arms shipment he is now criticising was being debated - did he not support it? Where was he when the main opposition challenger in last year's election, Maada Bio was stoned and injured? did he not say the man feigned it and later he self-inflicted the injury to his head? Why is our politician busy attacking the IG when as a matter of fact, the deplorable condition of our police officers is a shame for De Pa's government. Why didn't Orbangu direct his fire at the government?
Anyway, IG Munu should be packing his bags slowly. This country is now settling into this little game in which the sacking of important public officers is always preceded by a kind of media campaign against them, reference Petito of Mambolo. They are often orchestrated. Long Live De Pa.
TAXATION WITHOUT REPRESENTATION IN KENEMA AND KAILAHUN
The whole country is very quiet about the injustice thousands of our people are facing in Kailahun and Kenema. What is happening to the people of two constituencies in the eastern region where the people are not represented in parliament is a clear case of JUSTICE DELAYED IS JUSTICE DENIED. If this had happened in De Pa's land justice would have long been done. We have told the people in those constituencies that they could go without an MP for the life of this parliament.
It's one year now since elections were held in Sierra Leone. Why has it taken more than a year for the courts or NEC to rule on the so-called petition and allow the people to reconfirm their choices? Are we seriously being told that ONE YEAR is not enough for people living in those communities to be informed about the fate of those they elected last year? What is really happening to Sierra Leone?
Those two seats are rock-solid opposition seats and the Red Movement has no interest putting things right there. The man who petitioned the MP from Kailahun has since joined the Red Movement while the other is hanging on to something he should have lost the day he was soundly defeated.
We have to be very fair with ourselves. The courts would have long given a ruling and the elections would have been rerun without delay in the unlikely event the courts had ruled for such, if it was in Red Movement territory. This is totally unfair!
FILLING FREETOWN'S POTHOLES: IS THIS WHAT WE'VE BEEN WAITING FOR?
We are waiting for Health Alert, the NGO which gave the ultimatum we believe was an activity in the strategic plan for the sacking of Petito, to reassess the state of our roads and come out with another statement. Since Petito was thrown out of office, Road Fund Kaloko has called a news conference to announce that he was making 56 billion leones available to do the roads in Freetown. Driving around Freetown, we have seen people filling up potholes and we believe some of Kaloko's 56 billion leones has gone into this work.
The truth is, if this was what De Pa had in mind, then we are very disappointed. We believe the job is shambolic and will not last up to a year. Our roads have suddenly become a kind of coat of many colours. And it's not funny.
Please visit Model Junction, one of the busiest areas in Freetown and send us a message about your impressions.
We are very concerned about the timing of the release of that money. Coming shortly after Petito was sacked, we suspect some cynical manipulation took place and the Road Fund man will be pleased with himself today that he has managed to get particularly Munda Rogers out of office but we want him to know that we shall be there to pick up the pieces when his turn comes around. Very soon. Dis Na Salone.
(C) Politico 21/11/13
