By: Adapted from PTV News; Courtesy of The Montserrat Reporter
The possible exposure of Montserratian institutions and individuals to significant losses resulting from CLICO’s problems is prompting urgent local appeals for re-evaluation of the opportunities for investing in Montserrat.
Several commentators have, not surprisingly, reached the rational conclusion that were Montserratians more often to express their commitment to national development by investing in their own country, the island would be in a position to offer more jobs to more people and to lift itself out of its pitiful state of financial dependence on Britain.
And while the tendency to invest abroad, even as opportunities go begging at home, is coming in for under spread criticism. The practice seems to be more of an irritant in the case of the Bank of Montserrat than in the case of any other entity.
With an unconfirmed exposure that may be as high as $30 million, the Bank of Montserrat’s defense of its less than illustrious portfolio of visible projects here at home is not attracting much sympathy among the cream of Montserrat’s business minded.
In part, Government’s majority stake in the bank may be the reason for the assumption that the Bank would naturally prioritize investing in Montserrat.
Asked about this, Financial Secretary, Mr. John Skerritt said, he too would like to see the Bank of Montserrat investing more in this country. Noting that “banks are only as good as their management,” Mr. Skerritt cautioned however that the Bank of Montserrat is not only under-capitalized, but operating under strict regulations imposed by the Central Bank to which it remains indebted.
Others have pointed out, however, that the Bank of Montserrat seems in no particular hurry to clear its debt to the Central Bank. It was confirmed that immediate repayment of that debt would expose the Bank of Montserrat to local taxation. According to FS Skerritt, Government has been cautious about the extent to which it seeks to influence decisions of the Bank of Montserrat.
Its fiduciary responsibilities and those of the Bank’s directors were cited as the main reasons.
In the mean time, however, several professional businessmen and analysts contacted by PTV are looking on at what’s being described as the Bank of Montserrat’s negativism and unimaginativeness, with feelings of disdain bordering on scorn.
A rather more generous assessment points out that the Bank of Montserrat, having being rescued by Government and the Central Bank in a moment of crisis, continues to be nervous about risk taking. With CLICO as its investment of choice just the same, it is now painfully apparent that the Bank of Montserrat may have taken the wrong risk. And while it is acknowledged that this premiere local institution leads the way in the value of mortgages and consumer loans that it holds, its perceived unimaginativeness and reticence in promoting growth of local business activity at a time of dire need will continue to earn the description of reprehensible from a number of accomplished financial analysts.
Meanwhile in Port of Spain, Trinidad, the position of the ailing CLICO group of companies is becoming clearer. A number of steps have been announced to save the group from bankruptcy. These Trinidad decisions are of intense concern to local individuals and Government of Montserrat alike.
This is understandable considering that some $82 million is at risk in the crumbling institution.
The bail out plan recently announced for CLICO would apparently offer substantial protection to investors. Under the plan, CL Financial will sell some of its lucrative assets in return for Government’s cash and support. It will give up its 55 percent stake in Republic Bank Ltd., worth billions of dollars, the country’s largest commercial bank. The Trinidad Government will gain control of Republic Bank shares through the National Insurance Board and First Citizens. The State will also assume control of shares in the CL Financial’s energy firm Methanol Holding Trinidad Ltd, which owns and operates M5000, the world’s largest methanol plant at Pt. Lisas.
“In the past few weeks,” said Central Bank Governor Williams, “Colonial Life Insurance Company and CLICO Investment Bank have been strapped for cash and in the past few days, the Bank began to face an unusually high level of withdrawal requests which put a strain on their available liquid resources.” CLICO’s Chairman Duprey said he approached the Central Bank for help on January 13 to raise the issue of financial assistance from the Bank.
Government’s intervention means that policyholders and depositors with CLICO’s life insurance plans and CIB and CMMB investments will be protected by Government.
According to the Central Bank’s Governor Williams, “The principle objectives are to ensure that resources are available to meet withdrawals of third party CIB depositors and CLICO’s policyholders; to protect the funds of the depositors and policyholders and in so doing maintain confidence in CLICO.”
For Montserrat investors like the Bank of Montserrat, the Trinidad announcement is certain to be welcome news.
It is not likely to return the profits of which they may have dreams, but it could return a substantial portion of their precious investments.
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