January 29, 2013
Financial Services Authority facing its first major test

Tue Jan 29, 2013

Searchlight joins with the Leader of the Opposition in calling on the Financial Services Authority (FSA) and the Ministry of Finance to make a direct statement about what measures are being taken to secure shareholder investments in the St Vincent Building and Loan Association (SVBLA).{{more}}

Depositors and shareholders of the SVBLA are understandibly worried about the contents of a letter published by Luke Browne in the Vincentian newspaper of January 18, 2013. Who can blame them? Vincentians had a combined total of EC$375 million in the failed CLICO/BAICO empire, and although the East Caribbean Currency Union (ECCU) governments have been working hard on a resolution to this matter, and some policyholders have had their matters resolved, many have not.

Last Friday, the FSA published, in local newspapers, a progress report, in which the SVBLA was referred to in passing. To say that the SVBLA has entered into a Memorandum of Understanding with the Ministry of Finance, under assistance of the World Bank, to introduce measures to “strengthen the overall condition of the institution”, and that the FSA is satisfied with the ongoing work, is not enough.

Mr Browne, in an article in today’s SEARCHLIGHT, said he published his letter of January 18 after he was unable to get answers to certain concerns he had. While Mr Browne asked legitimate questions about the corporate governance and financial health of SVBLA, surely, there were other more responsible routes he could have taken to have his questions answered. We are not here saying that Mr Browne, as a shareholder, does not have the right to hold the board and management of the SVBLA accountable, but where financial institutions are concerned, extra care must be taken with one’s public pronouncements.

The SVBLA is no fly-by-night organization, having been incorporated over 70 years ago. It has a membership of more than 20,000, a sizeable chunk of the local mortgage market, and according to recently published information, had an asset base of $246 million as at December 31, 2010. Despite this, the SVBLA, like other financial institutions, is in no position to withstand a sustained attack on its liquidity.

If the SVBLA is allowed to go under, our financial system, not only here in St Vincent and the Grenadines, but throughout the ECCU, would sustain a major shock. Our regional economies are in no shape to deal with any more stress. The government regulators need to act now, to ensure that the situation is brought under control. They also need to let shareholders know what is happening, perhaps at a special meeting of shareholders. No consideration should be given as to who are the players involved. This matter is far bigger than any one individual or group of individuals.

The recently established FSA is facing its first major test. Let us hear from you.