BASSETERRE, St. Kitts – IN response to a lawsuit filed against the Eastern Caribbean Central Bank (ECCB) and other regional banks for their intervention in the Bank of Antigua, the central bank has explained the move was necessary to avoid financial meltdown in the region.
The Stanford Victims Coalition, a group of investors who claim they lost big after the “unlawful seizure” of the Bank of Antigua, filed a class-action lawsuit in the US District Court in Dallas, Texas on Tuesday (Feb. 16), one year after the bank’s former-Chairman Allen Stanford had been charged with fraud by the US Securities and Exchange Commission.
The suit is brought against the ECCB, the five regional banks that joined forces to rescue the failing institution and the government of Antigua and Barbuda.
A press statement issued by the ECCB explained that, irrespective of the intentions of the group, the Bank of Antigua is an institution licensed under the Banking Act No. 14 of 2005 of the laws of Antigua and Barbuda. It is not an offshore bank and is therefore regulated by the ECCB, the release said.
The release further stated that the Bank of Antigua suffered a “classic bank run” last year, which was precipitated by news of Stanford’s fraud allegations and the appointment of a receiver over all his assets by the United States District Court of Dallas.
“The run threatened the capacity of the Bank of Antigua to remain a viable entity and in the process put at risk the interest of depositors and creditors of the bank, the great majority of whom were citizens of Antigua and Barbuda.
“The possible failure of the Bank of Antigua also had the capacity to destabilize the banking and financial system in Antigua and Barbuda, and by extension that of the Eastern Caribbean Currency Union (ECCU) because of its participation in the clearing and settlement system,” the report read.
The central bank explained that in order to avoid a financial crisis, it assumed control of the Bank of Antigua in February of last year. This decision was made on the direction of the Monetary Council and in accordance with its Emergency Powers, conferred on it by the ECCB Agreement 1983.
This, according the ECCB, forced the governments and people of the ECCU to incur significant costs to provide liquidity for the failing bank so as to protect the financial system against systemic threats.
“This is the classic role of a banking regulator or lender of last resort conferred on central banks from time immemorial. In recent times, in the current crisis this is a familiar occurrence in the United States where many financial institutions have been taken over by the regulatory authorities to prevent financial meltdown and to protect depositors and creditors,” the release continued.
Since the financial difficulties of the Bank of Antigua, a management company called the Eastern Caribbean Amalgamated Financial Company Ltd was appointed to manage the Bank of Antigua on behalf of the Central Bank and “return it to normalcy”.
The company comprises representatives from the indigenous banking sector, namely the Antigua Commercial Bank Ltd, East Caribbean Financial Holding Company Ltd, National Commercial Bank (SVG) Limited, National Bank of Dominica Ltd, St. Kitts-Nevis-Anguilla National Bank Limited and the Government of Antigua and Barbuda.
All these institutions were sued by the group of Stanford victims as they argue that the seizure of the Antiguan bank was “unlawful”.
The Central Bank informed it has been in constant contact with the United States Securities and Exchange Commission and Ralph Janvey, the US Receiver of the Stanford Estate – both of whom the central bank claims have not “challenged the legality or propriety of the Central Bank’s assumption of control of the Bank of Antigua”.
