The Trinidad and Tobago's Central Bank
which apparently still functions for the purpose for which it was created, unlike
ours here in Guyana which has been denigrated to becoming increasingly subservient to the Ministry of Finance, its
role diminished to collecting statistics and undertaking bank inspections has abandoned
− or doing very badly- one of its most important roles, i.e. the
oversight of the financial sector; anyway according to the Governor Ewart Williams of the Central Bank
of T&T "international issues did not cause CL International to fail, the
fall in methanol prices and decline in real estate values associated with the global
crisis were, at best, just triggers which would hardly have posed problems for
CL Financial had these operations not been linked to its financial companies
within a conglomerate, that followed highly questionable financial practices.
The T&T Central Bank's Governor's statement
identified three such questionable practices and I quote him: (i) excessive
related-party transactions which carry significant contagion risks'; (ii) an
aggressive high interest rate resource mobilization strategy'; and (iii) a
very high leveraging of the Group's assets'. All of these were relevant to how
Clico Guyana was being run.
The Clico
disaster is probably the biggest failure of a Caribbean company in our history and
has the potential to affect thousands if not hundreds of thousands of people in
the region.
The
saga started on 30th January 2009 when the Prime minister of Trinidad and Tobago [T&T] Patrick Manning announced that a major bail out package had
been agreed on to help the Trinidad-based conglomerate, CL Financial Group, out
of serious financial trouble.
Under a
Memorandum of Understanding (MOU) signed between the parties, the government of
Trinidad and Tobago promised to provide funding to the company in exchange for
collateral and an equity interest in the Colonial Life Insurance Company
(CLICO) to protect the Trinidadian policy holders; note this ladies and
gentlemen the bail out helped only the Trinidadian policy holders. The package
offered to Clico Trinidad had noting to do with the operations of Clico Guyana.
As a further
condition of the MOU the license of the CLICO Investment Bank (CIB) was also to
be revoked as CL Financial moved to divest itself of 55 per cent holdings in
Republic Bank Limited and shares in Methanol Holdings Trinidad Limited (MHTL).
This should have signalled to all territories within
the Caribbean that they should look at their local Clico companies closely to
determine if they posed any risk to the people who were insured or had invested
in the local branch of the Company.
Ladies and
Gentlemen this is not a time for finger pointing here in Guyana, but we do have
to investigate the matter and we have to determine how, and if, the statement
by the Governor of the Central Bank of T&T, which was the monitoring body
tasked with regulating and monitoring Clico Trinidad since 2004, is relevant to
us in view of the Clico collapse but especially following the Globe Trust
collapse here.
You see
ladies and gentlemen when we emasculate our institutions of monitoring, supervision
and regulation, and man them with people who are politically pliable and
ineffective we cause numerous other problems and in our case there is no doubt
that the Bank of Guyana played no significant part in this matter and they
should have, since Clico was issuing bonds promising 6% return and as such
should have been forced to operate under the Financial Institutions Act as if
they were a lending institution, and prompted by what Christopher Ram has
written, I also believe that the Financial Institutions Act mandates them to;
but they were not monitoring Clico effectively and we have to ask why?
We also have
to determine if Ms Van Beak alerted the BOG to the fact that Clico Guyana was haemorrhaging
large sums of the local shareholders money to other countries so that the local
Company's assets were several billion dollars less than their
liabilities and what we did about it? In fact we have to determine whether they
could have done anything about it at all?
The Governor
of the bank of Trinidad and Tobago had this to say on the matter "In our
regular monitoring of CIB and of Clico since 2004 (when insurance supervision
was transferred from the Ministry of Finance to the Central Bank of T&T)
the Central Bank has consistently focused on these deficiencies but have been
stymied by the inevitable challenge of change and by inadequacies in the
legislative framework which do not give the Bank the authority to demand these
changes [i.e. Clico and probably other big companies with a barrage of lawyers are
frustrating action by the governments in the region at every turn and so escape
complying with the financial regulations]
It
would be easy to blame Ms. Van Beak and apparently someone already has, but we
must find out all the facts before we apportion blame, what is for sure is that
this government does not have the money to pay out close to 12 billion dollars,
as our President has promised, since after decades of mismanagement the money
is just not there.
But
if we don't have the money and can't possibly raise what amounts to 10% of our total
national annual budget for the bailout, a lot of Guyanese will be hurt in this
collapse.
Governor Williams
of the Central Bank in Trinidad was telling us that the Central Bank had been
concerned about CLICO's operations since 2004. He was saying that the Central
Bank could do nothing about their concerns because of the absence of the
necessary legislative authority. The obvious question is why the necessary
legislation was not put in place? The next obvious question has to be whether there
is an adequate legislative framework here in Guyana to force Clico in this case
to comply with our Commissioner of Insurance who was quoted as having determined
since 2004 that this company's liabilities in Guyana outstripped its assets by
several billion dollars. It even formed part of her 2007 report.
We have learnt one
thing from the CLICO debacle and that is that the governments in this region
must equip themselves immediately with the necessary legal framework and
supervisory powers to effect adequate regulation of these large financial
entities mushrooming in the region in the public interest, and as one
writer put it "not seek to close the gate after the horse has bolted".
In the CLICO
case, it is clear that the authorities within the region cannot claim that they
did not know'. They did know as early as 2004 according to the Governor
of the T&T Central Bank, this is what we must investigate i.e. why having
clear evidence that Clico was up to some very irregular business activities all
over the Caribbean not one government in the region rushed in to save their
citizens from the huge losses they will inevitably have to bear.
In
our case despite warnings since 2004 that the local Clico Branch Clico Guyana
Limited had liabilities which were billions of dollars greater than their local
assets and we had in fact documented it since our Finance minister was able to
pass on to the Bahamian Government "a plethora
of correspondence, including wire transfers of substantial amounts, dating as
far back as 2004 with CLICO (Guyana) utilizing several local banks to transfer
money to CLICO (Bahamas) accounts in Ocean Bank in Florida"
Ladies and gentlemen at this time I will not speculate too much on the
legality/illegality of the Bahamian government being legally entitled to liquidate
Clico Bahamas, a company in which 51% of its assets was Guyanese at the end of
2007; and if the trial is legally binding on them or indeed whether Clico Guyana
will be entitled to any of the liquidating proceeds to relieve our citizens of
part of the 12 billion burden they will now have to carry, that will have to be
determined by the Bahamian Courts, apparently we have retained legal personnel to
represent our interests there and that is at least a step in the right
direction.
We obviously have to handle the situation very carefully since if they
don't recognize that Clico Bahamas was holding substantial assets of Clico
Guyana, and to date their actions establish that they may be unprepared to
accept our position, the repercussions to our citizens could be devastating.
This matter was brought to our parliament on 12th
March on a motion to have a commission of inquiry on the matter from opposition
leader Robert Corbin the motion was denied but the matter was passed on
another motion to the Economics Services Committee [ECS] by the Guyana
Parliament, shortly after at a meeting of the ESC on the 27th March
2009 the ECS decided that they would commence the investigation by calling on Ms
Van Beek to give evidence, the committee also decided to conduct their investigation
in camera before releasing its findings to the House, at the next
ECS meeting on the 17 April 2009 the chairperson Ms Gail Texeria announced
that since this matter was sub judice, she has been directed not to discuss it
further and consequentially it has now been virtually withdrawn from the ECS,
we in the opposition do not agree that what we intended to discuss are in fact
the elements of the matter now before the court, especially since we decided to
discuss it in camera and so the sub judice principle is just a red herring to
force us not to discuss the matter and expose the shortcomings of the Guyana Insurance
Legislation and its enforcers which allowed this debacle to happen.
