Global IssuesCARIBBEAN: Bank Scandals Add to Region's Economic Woes
Caribbean leaders emerged from a one-day special summit on Wednesday night to announce new mechanisms to deal with some of the problems plaguing the region's financial sectors, occasioned not only by the ongoing global crisis, but by several homegrown scandals as well.
'We’re suffering from the fallout of the international crisis but it is not beyond us to sort out the difficulties, which we have. We have done so in the past,' St Vincent and the Grenadines Prime Minister Ralph Gonsalves told reporters.
Prior to the start of the talks here, Grenada’s Prime Minister Tillman Thomas told IPS that the global crisis had frozen millions of dollars in foreign investment, particularly in the tourism sector.
Caribbean countries have been further rocked by the collapse of the Trinidad-based conglomerate CL Financial and the move by United States regulators to seize the assets of Texas billionaire Sir Allen Stanford, who has substantial investments, including banks, in the region.
U.S. regulators have accused Stanford and senior executives of his company, Stanford Financial Group, of perpetrating financial fraud of a 'shocking magnitude' against unsuspecting investors, provoking depositors in Antigua and Barbuda to make a run on the financial institution.
In addition, Antigua's Baldwin Spencer government, which is campaigning for a Mar. 12 general election, was forced into reconvening a prorogued parliament so as to give authorities legal right to seize a number of assets belonging to Stanford.
In the case of CL Financial, several regional governments have also gone to the courts to safeguard the interests of those who invested significant amounts of money in the company’s flagship Colonial Life Insurance Company (CLICO). Authorities in Trinidad and Tobago have admitted that the financial problems facing the embattled conglomerate were far worse than first anticipated even though the government has agreed to plough billions of dollars into the company.
The Patrick Manning government is providing the funding in exchange for collateral and an equity interest in CLICO and will also act as a catalyst for implementing a change in the current business model and corporate governance of the insurance company that has interests throughout the Caribbean.
In addition, CL Financial is to divest itself of its entire 55 percent holding in Republic Bank Limited, the largest commercial bank in the oil-rich twin island republic, as well as shares in a methanol company.
In Barbados, Opposition Leader Mia Mottley has filed a motion of no confidence in Prime Minister David Thompson over his handling of the affair.
In the motion, the opposition contends that the prime minister misled local policyholders when he indicated that the subsidiary of the company here was 'sound, prudently managed and well regulated' and that investments held by Barbadian depositors, investors and holders of insurance policies could be considered safe, while he knew, or ought to have known, that the company’s statutory fund deficit was 46.5 million dollars at the end of 2007.
Debate on the motion is scheduled for Friday.
Amid these various unfolding scandals, Manning said the special meeting here provided the leaders with an opportunity to 'understand exactly what is happening in our region.'
'We see things happening in the United States that we never thought that we would see...significant changes in the international community and those things have not escaped us here in the Caribbean,' he said.
Gonsalves, who chaired the special summit, said that the discussions had resulted in commitments by regional governments to have their regulators meet on an ongoing basis to ensure the stability of the financial system.
'The message emerged, loud and clear, that the crisis which has been engendered has put us in a position that we must strengthen the regional integration process, so that we would be in a better position in the future if challenges to the financial system and especially in the non-banking financial institutions arise,' Gonsalves said, adding that Caribbean financial regulators will meet in Trinidad next week to begin the process of further cooperation.
That idea had earlier been flagged by the host Prime Minister David Thompson, who suggested it would provide his colleagues with a better opportunity to confront the financial challenges facing them.
'What is patently clear arising out of this meeting is that there needs to be more contact between the regulators so that they can verify the accuracy of information, so that they can share information about the adequacy of statutory funds or assets owned by insurance companies so that they can ensure compliance with the provisions of the legislation and so that they can ensure that there is an arms length relationship between the trustees that are holding the assets in trust for the insurance company,' Thompson said.
The meeting here on Wednesday comes a week before the leaders will gather in Belize for their scheduled inter-sessional summit and Caribbean Community (CARICOM) officials have already acknowledged that the strategies to deal with the global financial crisis will be among the most pressing matters.
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service