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Tuesday, March 13, 2007

Fiji National Provident Fund saga continues

The saga at the Fiji National Provident Fund (FNPF) continues with calls for an investigation into FNPF's staff loans.

While the saga continued, the banks continue with their praises for Reserve Bank of Fiji's (RBF) regulatory abilities and activities.

However, as I have said earlier, the stories/reports that continue to come out of the FNPF provide little assurance as to the RBF's abilities as well as those other "checks and balances" mechanisms that we relied upon such as the Board of Directors of the FNPF and its external auditors.

It is evident that the banks will praise the RBF because it is really RBF's monetary policy settings over the last two years that has contributed to the very high profits being recorded by banks in the same period.

The RBF on the other hand seems to be very happy about the increasing "interest spreads" recorded by the banking system. Here is a quote from the RBF's Quarterly Review for December 2006, page 25,

"After decreasing in the June [2006] quarter, the interest spread appears to be on the recovery path, with the recording of an improved spread of 5.1 percent in September (4.8 % in June)."

Interest spread is the difference between the return on banks' earning assets (including their loans) and their cost of funds (which includes their deposits). As evident from the commentary, in the midst of the interest rates hikes by the RBF, banks have had a good time increasing their interest spreads .... little wonder then that their profits increased astronomically.

It is high time now that the RBF come out and say what actions they have been taking with regard to the FNPF as its prudential supervisor. Was it aware that such things were happening? When was the last time, it had a good look at FNPF's investment portfolio and quality of assets? Has it reviewed the Fund's staff loan portfolio as it does with banks during an on-site inspection?

There is no time for them to hide themselves like an ostrich while members are getting irate about the investment of their retirement dollars.

In the meantime, here are the articles from yesterday's Fiji Sun calling for a probe into FNPF's staff loans followed by one in today's Fiji Times with the outgoing Westpac Chief Manager Fiji, David Evans, praising the Reserve Bank of Fiji's regulatory abilities.

"Call to probe FNPF staff loans

Investigations should be carried out on Fiji National Provident Fund staff who loaned to buy houses and have utilised it for commercial purposes, which is a breach of policy.

Former Fiji Labour Party head of security Posiano Nauku told the Fiji Sun yesterday while investigations are carried out on suspended general manager Olota Rokovunisei and deputy Foana Nemani, other staff that has taken housing loans should also be monitored.

“From the Fiji Sun’s revelations, it seems there is more to it,” he said. “The FNPF has been a closely-knitted unit for years where they keep and bury their dirt together. It is a welcome that such reports have come out publicly for the people to know the truth.”

Mr Nauku also questioned the intergity of the FNPF auditors and its former board members on why they had been quiet over the matter. “It’s like I scratch your back and you scratch mine kind of business.

The assurance by the FNPF management that our money is safe is not enough,” he said."

"Banker sees strength in sector

FIJI'S commercial banking services have become stronger in the last 20 years and are now of international standard, says an industry player.

Westpac Banking Corporation's outgoing general manager Fiji, David Evans guided the Australian giant's local operations for the last four-and-a-half-years.

He said Fiji was fortunate to have a good regulator in the Reserve Bank of Fiji.

Mr Evans, who came to Fiji in 2002, returns to Australia on Friday at the end of his contract.
"I think we are very fortunate in having a very strong banking system here," he said. "You have got banks here that are operating to international standards,"

Mr Evans said the country's central bank, "works continually in improving the process around the regulatory environment which we work in," he said.

"From an economic point of view, Fiji is very fortunate in having a very strong banking sector."
Having spent a quarter of a century in the money world, Mr Evans described his time as general manager Fiji "as very exciting".

"There weren't any surprises as such. There were a team of people who were very focused and committed in working for the business."

Mr Evans said the announcement by the Interim Government to have a local bank was welcome but warned it involved a long process.

"The only thing I say is that any new bank that comes into the banking arena must be able to operate to the same international standards as all the other banks.

"So firstly, it's a level playing field but the new competitor does not dilute the strength that we already have in the banking system.""

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