Commonwealth Bank’s shareholders voted unanimously to jumpstart the Bank’s response to potential regulatory capital deficiencies nearly 10 years ahead of time by amending its Articles of Association with respect to its preference share rights in order to comply with the Basel III definition of approved regulatory preference shares to meet the stringent standards by 2023.
Basel III, as it’s commonly known, is a comprehensive set of international standards developed by The Basel Committee on Banking Supervision to strengthen global capital and liquidity rules to promote a more resilient banking sector better equipped to absorb any shocks arising from financial and economic stress. The standards, now adopted by local regulators around the globe, require banks to comply in full by the year 2023, but Commonwealth Bank is leaping ahead, meeting the 10-year requirements approved by The Central Bank of The Bahamas a decade ahead, explaining the reforms strengthen the bank against future downturns in the economy.
“In planning for the implementation of Basel III, we have judiciously responded to proactively and immediately address any potential shortfall of regulatory capital resulting from this standard as it is progressively implemented over the next 10 years,” said Commonwealth Bank Chairman William B. Sands Jr.
The move, approved by shareholders at the Bank’s Annual General Meeting May 15, affected some $50 million of unissued preference shares, making them noncumulative, meaning and redeemable only after five years and with prior approval of the Central Bank. However, the most important term — the rate of return for shareholders — was unchanged at Bahamian prime rate plus 1.5%.
“Although the shares are noncumulative, the reality is that we have never experienced a period where our profits were insufficient to pay dividends. That simply has never happened,” noted Sands. “Commonwealth Bank has paid quarterly dividends every single quarter to both Common and Preference Shareholders since Commonwealth Bank became 100% Bahamian owned in 1984 in addition to the many extraordinary dividends that our Common Shareholders have enjoyed.”
Commonwealth Bank, with some 550-plus staff members and more than 6,000 shareholders, operates branches in New Providence, Grand Bahama and Abaco. Last month, the Bank’s Oakes Field branch was forced to close following a fire that broke out in the midst of a record rainfall and lightning storm. That branch relocated and re-opened less than two weeks later in the Burns House Building on John F. Kennedy Drive and Bethel Avenue offering all of the products and services offered at the Oakes Field location, including Saturday Banking.
