The International Monetary Fund (IMF) has raised alarms over three troubled banks in Liberia, including a state owned bank that pose significant risk to the nation’s economic stability.
In a recent report, the Fund outlined a comprehensive country program aimed at restoring the state-owned Liberia Bank for Development and Investment (LBDI), which has faced a prolonged crisis lasting over four years.
The IMF highlighted that a number of banks had failed to meet crucial reserve requirements set by the Central Bank of Liberia (CBL). This shortfall underscores the vulnerabilities within the Liberian banking sector and the urgent need for reform.
To address these pressing issues, the IMF’s program includes an independent audit of LBDI, which is designed to restate the bank’s financial accounts accurately. This action, deemed a priority, aims to assess the institution’s overall health and to identify necessary corrective measures.
“The restructuring of LBDI is crucial, and the management is committed to reducing its high levels of non-performing loans (NPLs),” the IMF report stated. “Implementing recommendations from an independent external review of NPLs stands as a top priority.”
While LBDI develops a restructuring plan, the CBL will maintain strict oversight to monitor the bank’s performance. Central Bank authorities revealed plans for a resolution strategy that will come into effect should the bank’s restructuring efforts fail to achieve desired results.
As part of the reforms, the CBL intends to enforce reserve requirement regulations strictly while simultaneously modernizing the regulatory framework for financial institutions. This includes the re-submission of the Bank-Financial Institutions and Bank Financial Holding Companies Act (BFIA) to the Legislature.
The approval of this act is critical for transitioning to a risk-based supervision model, which is essential in safeguarding the financial system.
The CBL’s immediate focus will shift to operationalizing a bank resolution framework aimed at equipping regulators with the necessary tools to manage insolvent banks efficiently, minimizing reliance on public funds and mitigating risks to the broader financial system, the Fund said.
