The moratorium on CSI and BDBL

I’m not a banker, but I’m surprised by the patent lack of understanding displayed by FM Lyonpo regarding the lifting of moratorium on CSI and BDBL.  

I read recently a notice by the RMA clarifying the underlying reason and rationale for the imposition of the moratorium in the first place.  Not only had the NPL well exceeded prudential guidelines, but more fundamental was that the institutions had “several lapses and non-compliance….and several weaknesses in governance process. (including) flouting of strict rules and guidelines”

As such, seems like a valid reason for the moratorium and that the NPL was a simple quantitative reflection and result of the identified weaknesses.

I wonder whether the honorable FM is confident that the widespread weak operational and control processes have similarly been improved/rectified alongside of his observation of “impressive recovery”.   Perhaps the latter “recovery” is simply due to accounting classification?  So I’d contend there are plenty of “smoke and mirrors” to impress the honorable FM – rather than any real changes to prove that they have truly improved.  

As to how to cherry-pick “good portfolios”, if the poor policies and weaknesses haven’t been fixed, I’m not sure how using the same broken processes can accurately sift out good portfolios.  Seems both simplistic and naïve to simply pick good portfolios to me, but I’m not a banker.

But as a layperson reading the RMA explanation can conclude strong reasoning and justification.  Perhaps FM Lyonpo hasn’t had the benefit of reading about the root cause of issues highlighted by the RMA (although I wonder what he did in fact discuss with them when he said he’d met?), rather than simplistically focusing on NPL as a number and justification – which is purely a symptom of the underlying root cause.

A Concerned Citizen  

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