Venner: Difficult, challenging time

The challenges faced by the East Caribbean Central Bank (ECCB) during the year 2008/2009 have underscored the critical importance of adequate supervision and regulation of financial institutions in the sub-region.{{more}}

In his annual report broadcast throughout the sub-region on Monday, 29 June, Governor of the Bank, Sir Dwight Venner, said that the collapse of the C L Financial Group in January 2009 and the run on the Bank of Antigua Limited in February 2009 were “two major issues” which the bank was called upon to deal with.

Venner said, in the case of the CL Financial Group, the Bank, though not the regulator of the insurance sector, was requested by the Monetary Council to coordinate the efforts towards the resolution of this issue.

“In response to the run on the Bank of Antigua Limited, the ECCB exercised its emergency powers under the Eastern Caribbean Central Bank Agreement Act 1983, and intervened swiftly to restore normality to and confidence in the financial system,” Sir Dwight said.

These challenges, the Governor said, “underscored the critical importance of adequate supervision and regulation of commercial banks, insurance companies, credit unions and other institutions to ensure the stability of the entire financial system.”

Describing the times we are living in as “difficult and challenging”, Sir Dwight said the global crisis has resulted in an estimated loss of value in investment assets of $30 trillion in international stock exchanges. Major banks in the United States, United Kingdom and Europe have had to be rescued by their governments. Credit has literally dried up in some developed countries and the authorities have had to pump billions of dollars into stimulus packages.

“These developments in the international economy have eroded conditions in the ECCU, as inflows of travel receipts and foreign direct investment (FDI) have contracted. Travel receipts fell by 2.5 per cent ($80.3m) in 2008, in contrast to a 3.0 per cent increase in 2007. Foreign direct investment decreased by 29.1 per cent to $2.3 billion, consistent with the slow-down in direct investment-related construction activity in some member countries.

“…The real GDP in the ECCU is projected to decline in 2009 and 2010. The projected decline in tourism and construction is over 14 per cent in 2009 and a little less in 2010. Governments’ current revenue is projected to fall by approximately 12.9 per cent in 2009.”

The Governor however assured that the member states of the ECCU have not been idle in their responses. The OECS/ECCU countries, starting with a Joint Meeting of the OECS Authority and the Monetary Council on 15 and 16 January 2009, have sought to “establish an action plan at the broadest level, to which has now been added a specific Eight Point Programme to address this economic crisis”. The action plan identified three sectors – tourism, construction and fishing which were to be given specific attention for resuscitating the economies.

Sir Dwight is of the belief that the challenges faced will bring out the best in our people. “We need stability, fortitude, unity and a strong sense of purpose to see us through these difficulties. The OECS Treaty and the ECCB Agreement have proved their worth in response to the insurance and banking crises. They have given the stimulus for proceeding speedily to the formation of an Economic Union and the deepening of the integration arrangements in the OECS.”

Despite the difficulties, the East Caribbean Central Bank (ECCB) made a net profit of EC$36.8 million for the year 2008/2009.