BASSETERRE, St. Kitts – GIVEN the magnitude of financial risk member states of the Eastern Caribbean Currency Union currently face as a result of liquidity troubles of British American Insurance Company (BAICO), the region’s top financial authorities have tabled a four-point approach to respond in the interest of depositors within the sub-region.
During a joint meeting of the Eastern Caribbean Central Bank (ECCB) Monetary Council and the Organisation of Eastern Caribbean States (OECS) Authority held in St. Vincent last Friday (June 19), it was agreed that the leaders and financial experts within the region must have a sharper understanding of the nature of the problem before moving to resolve it.
Minister of Finance and International Trade Hon. Dr. Timothy Harris informed that the special joint meeting was preceded by a meeting of the region’s Ministers of Finance on June 18, and was necessary to discuss the challenges faced as a result of what he calls “the British American debacle”.
Harris cautioned that the situation facing depositors and investors is “extremely grave” and, as a result, the joint meeting put forward a four-prong approach to “bring some solution to this insolvency facing BAICO”. He explained that one of the primary focuses of the proposed approach was attempting to keep the insurance aspect in operation to protect the clients’ interests.
“We have decided that for the element of insurance, we should continue to preserve the business as a going concern. This may include finding a company that would take over the insurance aspect of the business but it must continue to provide support for investors and depositors,” Harris told SKNVibes in an exclusive interview.
Because British American has a number of outlets throughout the ECCU, the second prong of the Monetary Council’s approach mandates that all solutions address the problem at a regional level, which would require much cooperation from various financial companies within and without the ECCU region.
Harris informed that the Monetary Council has already been in discussions with the governments of and various organisations from Trinidad and Barbados, adding that Bermuda, the country in which BAICO is registered, has been recently introduced to the resolution discussions.
“We believe that the best way of securing investors and depositors is to find a regional solution to the problem. So, we continue within the sub-region of the Currency Union to find solutions that would benefit the region as a whole rather than the member states at a country level. The exposure in the ECCU is greatest and so our response will require cooperation among member states. We should try as much to bring other regional players into the mix,” Harris said.
The other elements of the Council’s approach are to ensure that the protection of the interests of depositors and investors remain a “cardinal point” in the Council’s response and to aim at reducing the risks that the sub-region is faced with.
Harris said the ECCU region stands to lose about EC$1.6B which he noted would definitely cause significant stress on the region’s financial sector, especially in the face of the recent struggles of the Bank of Antigua.
“Affected would not just be people with all life savings, but also banks, credit unions and even governments that had money invested in BAICO. The impact on all these institutions and individuals can be catastrophic for the Currency Union, so there is a public interest for regional governments to pursue in this manner,” Harris stated.
According to Harris, the Council would convene again tomorrow (June 22) to formulate a resolution and appoint lawyers and insurance regulators to assist the Currency Union in the next step forward.
