The multi-million dollar logging industry is abuzzed with reports that the Central Bank of Solomon Islands (CBSI) is acting as the agent receiving Letters of Credit (LC) on behalf of the nation’s newest commercial bank, Pan Oceanic Bank (POB).
POB is reportedly finding it hard to establish a corresponding bank overseas. As a result it cannot receive Letters of Credit (LC) in US dollars on behalf of its Solomon Islands’ clients.
“When you do not have a corresponding bank overseas, you simply cannot do any business at all. The reason is that nearly all international businesses are conducted in US currency,” one well informed industry source said.
CBSI’s alleged intervention to help POB has raised eyebrows within the powerful logging industry and business houses in Honiara.
Angry industry sources said if the report was true, then the nation’s top monetary policy watchdog has compromised its independence.
“It has opened up CBSI to potential bribery and questionable dealings. CBSI should never be allowed to go this low. It should maintain its independence as a regulator,” one source said.
There are other questions as well.
Company Haus documents reveal that some of POB’s Sri Lankan founding directors have relinquished their directorship, suggesting they might have sold their shares to the new owner, Singaporean company, Pan Oceanic Investments Pte Ltd.
According to Company Haus document, POB was incorporated as Pan Oceanic Financial Group SI Ltd on 18 April last year. The title appears to have lapsed on 5th September of the same year. It has since assumed the name, Pan Oceanic Bank Limited. Its new owner, Pan Oceanic Investments Pte Ltd, was incorporated in Singapore on 10th July this year.
POB was granted a commercial banking licence in April last year after the Westpac Banking Corporation decided against receiving pre-shipment export bond of SBD$250, 000 per shipment on behalf of the government after it came under heavy international criticisms.
Westpac, which has since closed all logging company accounts, was accused of encouraging environmental damage allegedly caused by logging operations.
CBSI took over receiving the export bond fee as an interim arrangement. One of the reasons POB was granted its licence was that apart from providing general banking to the Solomon Islands’ public, it could take care of banking needs of logging companies. It is not clear whether POB has assumed accepting the $250, 000 log export bond on behalf of logging companies.
POB’s entry into the banking sector has also caused concerns amongst existing commercial banks such as ANZ, Bank South Pacific and Westpac.It is understood the commercial banks have succeeded in convincing CBSI to stop giving further banking licences.
At the time, the Governor of the Central Denton Rarawa, was reported to have said that the economy had the capacity to accommodate at least three more commercial banks.
However, CBSI has since rejected an application by a well-resourced overseas group, which applied to set up a commercial bank in Honiara.
Industry sources said the fact that CBSI is now reportedly acting as an agent for receiving Letters of Credit on behalf of another commercial bank shows CBSI has compromised its standing as an independent umpire on monetary matters.
But responding to the report when contacted by this paper last night, Nihal Kekulawala, POB’s Chief Executive Officer (CEO) who has just returned from overseas in a brief statement said; “This is all factually incorrect.”
He said POB has an US bank account overseas and has been using it to facilitate payments.
Mr Kekulawala also denied reports of shareholders withdrawing from the company.
The POB boss added that infact the shareholders have increased.
The Governor of Central Bank Denton Rarawa yesterday also clarified that CBSI is not an agent of POB to receive its Letters of Credit (LC). It only facilitates to ensure stability in the economy.
He explained at the moment CBSI is still facilitating logging payments since the financial institution that could have facilitated these payments after Westpac bank closed all logging company accounts is yet to establish its correspondence with the loggers bank in Singapore.
Mr Rarawa said reports stating POB is finding it hard to establish correspondence with banks overseas to receive Letters of Credit (LC) is not true.
By Alfred Sasako
