The current fees and charges being imposed by the Royal Bank of Canada (RBC) on deposit account maintenance and bulk cash withdrawals in the region, corresponding banking relations and the ongoing CLICO/ BAICO saga were some of the main issues raised by the Movement for Change and Prosperity (MCAP) at a meeting with the Governor of the Eastern Caribbean Central Bank (ECCB) Timothy Antoine this week.
The MCAP team was led by the Honourable Leader of the Opposition Reuben T Meade and included MCAP’s Interim Party Chairman – Jermaine Wade, MCAP members Charles Kirnon, Roselyn Cassell-Sealy , Dr Samuel Joseph and Brenda Daley. MCAP member and Economic and Financial Analyst/ Consultant Peter D. A. Queeley also attended the meeting.
MCAP voiced its concerns to the Governor regarding the recent decision by the RBC to levy a $25 monthly fee for deposit account maintenance and in particular highlighted the impact that this will have on small deposit holders notably with balances less than$15,000.
MCAP members also noted that the annual deposit account maintenance fee equates to $300 per annum and assuming the application of the minimum savings rate is 2.0% per annum, customers with account balances less than $15,000 will not earn $300 per annum in interest.
In this regard, MCAP recommended that the ECCB urgently considers the drafting and enactment of regional financial services consumer compliance legislation in line with what obtains in the USA.
MCAP further proposed that the legislation provides for justification and approval of fees to be imposed along with provisions addressing community reinvestment and predatory lending. The proposals are consistent with MCAP view that consumer compliance requires the force of law as opposed to been merely a Code of Conduct.
The ECCB concurred with MCAP recommendations and agreed to future discussion between the parties on the said issues.
MCAP also expressed concerns to ECCB representatives regarding the various issues and challenges posed by the retraction of correspondent banking relations for the ECCU region including Montserrat. In particular, MCAP noted the potential challenges related to international payment settlements, remittances and economic and financial disruptions.
MCAP expressed its support for the creation of a Caribbean Bank and/or Clearing House Arrangement in the USA specifically for the handling of correspondent banking relations on behalf of regional financial institutions. MCAP further noted that the said financial institution will face the same regulatory compliance issues; however, MCAP is of the view that the institution should not be overly profit driven.
Additionally, from a policy standpoint and again recognizing the importance of correspondent banking arrangements to the regional financial system and economies, MCAP recommended that private sector institutions along with regional Governments should consider investment in the regional bank and/ or clearing house arrangement to be based in the USA.
MCAP expressed its support for the regional CLICO/BAICO Plan of Arrangement Act and noted that the same will go a long way in providing some measure of relief to the many CLICO/ BAICO policy holders yet to receive compensation in the ECCU region including Montserrat.
From a policy standpoint, MCAP expressed to the ECCB its desire to see continued discussions and arrangements towards the full settlement of regional CLICO/BAICO policy holder’s investments.
Additionally, MCAP expressed its support for an earlier statement by the Governor of the ECCB that the principals of CLICO/BAICO should have their day in Court to answer charges relating to the operations of CLICO/BAICO.
Other matters raised by the Movement for Change and Prosperity (MCAP) are the Banking Act/ Eastern Caribbean Asset Management Corporation Agreement, the Amalgamation of Indigenous Banks and a Harmonized Regional Insurance Legislation.
MCAP expressed its support for the passage of the new Banking Act and the Eastern Caribbean Asset Management Corporation Agreement. MCAP noted that these legislations in particular the Banking Act served to strengthen the regulatory and supervisory framework of banking in the eastern Caribbean and provides a model platform for regulation and supervision for other financial institutions such as Insurance Companies, Credit Unions and Remittance Companies.
However, MCAP also raised concerns to the ECCB regarding the tardiness of the Government in having public discussions on the Banking Act; bring the said legislation to parliament and finally having the said legislation implemented.
Further, MCAP expressed its concern that notwithstanding the passage and implementation of the new Banking Act, to date, no information has been forthcoming from the Bank of Montserrat or the Government its major shareholder, regarding the implementation of a time bound plan for the bank to meet the EC$20.0 million paid up capital requirement.
MCAP noted that the Bank was currently in compliance with the BASLE Committee Capital Adequacy Requirement, however, MCAP further posited that increasing the Bank’s paid up capital in line with the minimum requirements as per the new Banking Act, will serve to add more resilience to cyclical economic and financial shocks and add confidence of the institution.
As a priority, MCAP noted that the Bank should consider opening its capital base for sale of shares to the Montserrat Public, Montserrat Diaspora and regional institutional investors.
The ECCB concurred with MCAP submissions and promised to look into the said matters with urgency.
MCAP expressed its support for regional initiatives regarding the amalgamation of indigenous banks operating in the Eastern Caribbean Currency Union noting the many efficiencies to be gained. However, MCAP noted that such amalgamation initiatives should be market driven as opposed to being regulatory driven. Notwithstanding, MCAP noted that an amalgamation agenda can be regulatory driven where regional indigenous banks exhibit clear safety and soundness issues.
MCAP expressed its desire for the ECCB to introduce comprehensive harmonize insurance legislations throughout the ECCU. MCAP notes the same would go a long way in insulating the region from events like the 2008 CLICO/BAICO collapse.
The ECCB Governor noted that the same was part of the ECCB’s strategic plan.
MCAP will have more next week on its meeting with the ECCB representatives.