ECCB Places First St Vincent Bank Ltd Under Receivership

A separate release posted to the website of the Eastern Caribbean Central Bank said  “As the regulator of banking business in the Eastern Caribbean Currency Union (ECCU), the ECCB has been monitoring the operations of FSVB closely for the past eight (8) years, including daily ongoing off-site surveillance; on-site examination in 2018, Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) examination in 2019, and most recently, on-site examination over the period 15 – 26 May 2023.

“Those examinations revealed the following:

1. Significant and sustained breaches of the Banking Act, 2015, especially in respect of capital requirements;
2. High credit risk and low earnings performance;
3. Poor accounting and corporate governance practices; and
4. Ineffective risk management systems.

“The foregoing deficiencies posed a serious threat to the depositors of FSVB and the future viability of the institution,” the release said.

“Notwithstanding the issues identified, the ECCB granted the board and management of FSVB time and opportunity to address the identified breaches and mitigate against the continued erosion of capital to place the institution on a sustainable path and become compliant with the Banking Act, 2015.

“During this period of forbearance, the ECCB also issued the following directives:

1. Restriction on lending to only cash secured facilities on 9 April 2018 (to protect depositors); and
2. Restriction on the payment of emoluments and other benefits, including board fees on 12 December 2018 (to protect liquidity and reduce capital erosion).

“In keeping with its mandate to protect the interest of depositors and creditors of FSVB, the ECCB, in consultation with the Government of Saint Vincent and the Grenadines, has implemented a two-phase resolution strategy for FSVB.

“Phase I – The ECCB has appointed David Collins of Interpath East Caribbean Ltd (trading as Interpath Advisory), as Receiver to assume control of, and secure the assets of,
First St Vincent Bank Ltd for an initial period of six months.  The Receiver will liquidate the institution via the sale of viable assets and wind up its affairs in an orderly manner to minimise risk to financial stability.

“Phase II – A Purchase and Assumption Agreement will be executed with Bank of St Vincent and the Grenadines (BoSVG) effective 1 June 2023, to acquire certain assets and assume certain liabilities of FSVB.  The remaining assets and liabilities will remain in the Receivership for liquidation.”

The release on the website of the ECCB also said: “The banking sector in Saint Vincent and the Grenadines remains stable.  The other four (4) licensed financial institutions, which operate in the country, are continuing to do business as normal.

“The issues which warranted the closure of FSVB were very specific to the institution.   Furthermore, the closure of FSVB is not related to the ongoing community banking challenges in the United States or elsewhere.  The challenges faced by some community banks within the United States stem primarily from the rapid increase in interest rates by the Federal Reserve (US Central Bank) as it attempts to reduce very high inflation.

“The ECCB gives the assurance that it will continue to exercise its powers to maintain financial stability and safeguard the soundness of the ECCU banking system.”