Sunday October 28, 2012
Consultant at CLICO/HCU Enquiry: Restructuring conglomerate was a most complex project Trinidad Guardian Management consultant Osborne Nurse rated the restructuring of the CL Financial (CLF) conglomerate at ten on a scale of one to ten, with ten being the most complex. Appearing Friday before the enquiry into the collapse of CLICO, CLICO Investment Bank (CIB) and British American and the Hindu Credit Union, Nurse said the Government had determined that CLICO should be injected with $5 billion in capital, which included equity capital. “Given the nature of the problem, certainly with CLICO, which is what I have focused on, the company was not in a financial position to borrow, because borrowing is an increase in liability, so borrowing would not have helped the problem,” he said. Nurse, former chairman of the Securities and Exchange Commission, was the managing director of Workers’ Bank after it was restructured and returned it to profitability. He was also the first general manager at First Citizens Bank,
into which the restructured Workers Bank, Co-operative Bank and National Commercial Bank were entrusted. At the time of CLF’s approach to the Government in January 2009 for an injection of funds, Nurse said he was working as an adviser to the Central Bank from February to June 2009 and then to the Ministry of Finance, so he was familiar with the bailout of CLICO and CIB. Nurse outlined to the enquiry how the bailout was handled. He said CLF initially asked for $1.4 billion, which would have satisfied its liquidity needs for about three weeks. “Bearing in mind the extent of the interconnection between the financial institutions and the entire (CLF) Group, it was considered important that some form of support or assistance be made available, certainly in respect of financial institutions,” said Nurse, whose evidence was supported by a PowerPoint presentation. Nurse said Section 44 (d)
of the Central Bank Act gave it the power to exercise a necessary level of control over CIB, but the Central Bank had no such emergency provision regarding insurance companies or what he described as “lender of last resort for securities companies.” “It was also determined that the public was best served if shareholders of financial institutions led by CLF were made to be financially accountable for the demise of problems facing CIB and British American, but no compulsory means by which shareholders could be held accountable,” he said. Nurse, a trained economist, said there were legal, economic and financial justifications for the intervention in CLF’s financial entities. He said in the case of CLICO and British American, they were to be recapitalised, restructured and returned to financial solvency and run as going concerns, with a new board, new management and the Government’s support. Nurse said it needed to be
borne in mind that the Central Bank had the capacity to lend support to financial institutions, but not insurance companies. Lone commissioner Sir Anthony Colman said, “CIB seemed to be a completely lost cause,” to which Nurse agreed. Nurse said Section 44 (d) of the Central Bank Act did not make provision for the restructuring of securities company, Caribbean Money Market Brokers, the CLF subsidiary. He said it was determined that no form of financial assistance be given to the parent and other entities other than financial institutions. “The regulators had no authority to intervene in the parent. It was a concern that the parent not dismantle or sell off assets at fire-sale rates.
That was the general principle of funding,” Nurse said. He said those deemed responsible for the crisis were not considered eligible for any government support, including repayment of any policy, receipt of dividends for the intervened entities. Nurse said third-party deposits from CIB were transferred to First Citizens Bank for payout. “That means that third-party deposits had to be backed by an equivalent value of assets, which would either come from CIB assets or would have to come from the Central Bank. “The CIB assets were considered to be, by and large, not in good quality condition. In any event, the liquidation of CIB would raise issues about how those assets were being disposed of, and
therefore it was done with the advance by the Central Bank of an instrument adequate to cover the value of the deposits.” Nurse said CMMB had assets under management of $6.2 billion in the repo market. “They were the leading institution in the sale and repurchase of financial assets.” Related party assets in it were about $1.7 billion. And third-party assets for the rest of the market was about $4.5 billion. He said the $6.2 billion represented about 75 per cent of the then ongoing trade in repurchase agreements in T&T. Nurse said it was felt if CMMB collapsed into liquidation, the investment community and not just the banking sector would be affected.
Govt. defeats motion of censure against Attorney General PORT OF SPAIN, Trinidad - CMC - The coalition People’s Partnership government closed ranks during the early hours yesterday morning and voted against an opposition inspired motion of censure in the embattled Attorney General Anand Ramlogan as the controversy continues over the early proclamation of Section 34 of the controversial Administration of Justice (Indictable Proceedings) Act. By a vote of 25-11, the motion filed by Opposition Leader Dr. Keith Rowley was defeated at the end of a marathon debate that lasted 15 hours and which Ramlogan described as a “personal vendetta”. Parliament last month repealed the controversial clause that had the effect of allowing people, whose trials have not started after a 10-year period to walk free and a verdict of not guilty entered against them.
Attorney General Anand Ramlogan and Opposition Leader Dr. Keith Rowley Critics, including the main opposition People’s National Movement (PNM), say that it was aimed at supporting businessmen Ish Galbaransingh and Steve Ferguson, who have been described as financiers of the ruling United National Congress (UNC), the biggest partner in the four-member coalition People’s Partnership government.
The two are facing fraud and laundering charges relating to the re-development of the Piarco International Airport in 2001. They are also wanted in the United States on a number of related charges. Washington, which had sought the extradition of the two men, has already expressed its “concerns” over the legislation.
The Bahamas delegation for talks on illegal fishing in the Dominica Republic NASSAU, Bahamas - The problem of illegal fishing by Dominican nationals in Bahamian waters has been an ongoing and historical challenge to The Bahamas and is an issue that encompasses increasing economic, security, environmental and resource costs for The Bahamas. With a view to ameliorating the issue and advancing discussions on other issues of mutual benefit, there has been agreement by
both countries to hold Bilateral Talks in the Dominican Republic from yesterday to 1st November, 2012. The Bahamian Delegation will be headed by Hon. Frederick A. Mitchell, M.P., Minister of Foreign Affairs and Immigration, along with Hon. V. Alfred Gray, M.P., Minister of Agriculture, Marine Resources and Local Government, Hon. Bernard J. Nottage, M.P., Minister of National Security and Hon. Ryan
Pinder, M.P., Minister of Financial Services. The Delegation will also comprise technical officers from the Ministries along with relevant private sector stake-holders. The Talks will involve the discussion of issues such as illegal fishing by Dominican fishermen, illegal migration and trade relations, particularly in the area of agricultural imports, medical products and investment in the tourism sector.