THERE IS ENOUGH blame to go around concerning the CL Financial debacle, but there are not enough fingers to point.
This is the assessment given yesterday by governor of the Central Bank of Trinidad and Tobago, Ewart Williams, during a Financial Institutions Conference hosted by the Central Bank of Barbados at Hilton Barbados.
Williams said the fallout was simply not the “finest hour” in the region for regulators, legislators or depositors.
“CLICO was a case of systemic failure. In a geographical sense, it was a failure of regional regulators,” he said.
However, he noted that there was inadequate insurance legislation.
“[Trinidad and Tobago’s] insurance legislation dates back to 1966 with one major adjustment in 1980.
“Our legislation doesn’t have the word annuity, so the EFPAs [Executive Flexible Premium Annuity], all the new products that caused the problem, were never part of the legislative machinery,” he said.
Noting that “the big issue” with CLICO was inter-party transactions, Williams said “the legislation has nothing to say, not even guidelines, and no ceilings on inter-company transactions”.
Asked why the government of Trinidad and Tobago saw it necessary to rescue the company, he said it “didn’t have a choice”.
“If you added CLICO and CIB [CLICO Investment Bank], you had about 50 to 60 per cent of liabilities in the financial system.
“CLICO owned 53 per cent of the largest bank, Republic Bank, and what is even more significant is if you look at the CL Financial Group, three or four major public sector institutions had major exposure.
“You had such large exposures on the public sector plus this was an institution that really accounted for a significant part of economic activity,” he said.
Williams noted that the central bank had taken action against the main players in the fallout since the “first responsibility” was with the board of directors and the management of the institutions. (NB)
