Revocation of Licence: ------------------------- I unreservedly support the decisive and courageous action of the Minister of Finance, Hon. Nazim Burke, to revoke the licence of Capital Bank Intl. It is an action that is long OVERDUE. Minister Burke’s administration has inherited a phenomenal mess. It is damned if you do and damned if you don’t!! While there are those who feel that time should not be spent casting blame, it is important that we the people understand clearly where the RESPONSIBILITY for this mess lies – squarely at the feet of the New National Party administration and in particular, the former Ministers of Finance: (i) Dr. Keith Mitchell, former Prime Minister and Minister of Finance, who re-issued the licence in February 1996 (after the licence had been revoked during the tenure of office of Sir Nicholas Braithwaite) and who refused to heed the recommendations of the Eastern Caribbean Central Bank that the bank’s licence should be revoked. (ii) Mr. Anthony Boatswain, another former Minister of Finance, who also refused to heed the recommendations of the Eastern Caribbean Central Bank. The Chief Executive Officer of Capital Bank International, Mr. Finton DeBourg, portrays himself and the bank as VICTIMS of a sinister plot on the part of the ECCB and Mr. De Bourg blames the government who issued him the licence. There is speculation that Mr. De Bourg wielded significant political influence as a member of the NNP’s A-Team and this is the reason that he may have been re-issued a licence without due process of ECCB investigation, prior to the licence being issued. Establishing a bank without the proper licensing procedure can be considered a lack of prudence on the part of Mr. De Bourg given that the ECCB also protects depositors’ money, in the event that any of the duly licensed banks should have problems which put the depositors’ money at risk. This LACK OF PRUDENCE demonstrated so early therefore puts in question Mr. De Bourg’s competence as a banker. The New National Party administration, led by Dr. Keith Mitchell, was well aware that Capital Bank Int. was not DULY LICENCED. All banks in the Eastern Caribbean Currency Union, of which Grenada is a part, are licensed on the RECOMMENDATION of the Eastern Caribbean Central Bank. This procedure is provided for in the law which set up the Eastern Caribbean Central Bank to be the sole REGULATORY AUTHORITY of ALL BANKS, foreign or indigenous, operating in the sub-region. Dr. Keith Mitchell therefore acted OUTSIDE of the law when he re-issued a licence to the bank without the review and recommendation of the ECCB. It is important that we the people understand this because the Capital Bank Intl. mess is what happens when a government knowingly disregards the law intended to protect the integrity of the currency union and the interests of depositors. When the mess hits the fan, as it inevitably does, everyone gets dirty and SOMEONE HAS TO FOOT THE BILL FOR THE CLEAN-UP JOB. It is always we the people who pay!! In the case of Capital Bank Intl., the depositors lose their money. Or, if government has to bail out the bank, then it is still we the people who pay. Money from government coffers belongs to we the people. Money spent bailing out the bank is money that the government does not have to spend on important things like health and education or infrastructure. E.g. there are SCHOOLS waiting to be fixed and supplies and equipment needed for the hospital. Therefore, I find it hard to understand the noises of a number of very influential persons who now appear be to very concerned about depositors’ money, particularly those depositors that they refer to as “the little man”. These persons were also well aware that Capital Bank was not DULY LICENCED. It is a real pity that these persons have only now found their voices. Had they found it earlier and gone on an active campaign against the operations of a bank that was not duly licensed, then they could have saved the “little man” and other depositors, as well as the country, this grief. An article in the Grenada Today, No Immediate Refund for Capbank Depositors, pg 11, notes that there are 518 depositors of Cap Bank. We must do an analysis and typology of these depositors in order to determine who is “the little man” and determine the percentage of the bank’s total operations for which “the little man” accounts. • Who are the depositors and the borrowers? • Where are these depositors and borrowers located? • How much money is the bank holding for these depositors? • How much money has been lent to “the small man” and other category of borrowers? • For what percentage of the loan portfolio does “the small man” account? As far as I am aware, the “little people” are the ones who GENUINELY “get ketch” by the bank. They are people who normally may not have been dealing with a bank at all; those who might have found it easier to get a loan at Cap Bank e.g. senior citizens, persons in rural areas. I have heard references being made to “large depositors”. I do not know what sum of money is considered large in the context of Cap Bank. However, “large depositors” would generally “shop around” before deciding where to lodge their money. So he/she would have made a VERY DELIBERATE choice of Cap Bank. More likely than not, those individuals would have been well aware that the bank was not duly licensed. Nonetheless, they would have thought that the potential benefit far outweighed the risk. Some of them may have even decided to deliberately support Mr. De Bourg’s venture. In this case, should anyone else be liable for the RISKS that these persons deliberately took? We the people must understand that we are very much responsible for the mess that we allowed the NNP regime to create in Grenada over the last 13 years. For a number of us, AS LONG AS WE COULD BENEFIT, WE DID NOT GIVE A DAMN that the country was “going to hell in a hand basket”. We considered it an opportunity/obligation to CASH IN. There are some facts about Cap Bank that we must bear in mind: • Cap Bank Intl. was banker to a number of OFFSHORE BANKS including the INFAMOUS First International Bank of Grenada Ltd. which defrauded hundreds of unsuspecting/ gullible Canadian and American “small men and women” of millions of dollars of their PENSION MONEY. These people too are still wondering if/how they can re-coup their money? First International Bank of Grenada was operating with a licence granted by the Government of Grenada. The New National Party benefited greatly from the largesse of First International Bank which BANKROLLED the party’s glitzy 1999 election campaign. Can we the people see patterns and draw conclusions? Is there a link between Cap Bank and First International Bank of Grenada that ought to be investigated? • Cap Bank has 518 depositors and at least nine branches ( refer Grenada Today, No Immediate Refund for Capbank Depositors, pg 11). I believe that at one time I had heard that there were eleven branches. On average that is less than 60 depositors per branch!! Is it economical to have nine branches serving 518 customers?? Just imagine other banks which have been around for years and have THOUSANDS of depositors. They do not have more than two or three branches. The nation’s credit unions which cover the entire Grenada and serve TENS OF THOUSANDS of depositors do not have more than three or four branches? How was the bank meeting the overhead costs of running all of these branches? It DEFIES good business sense. • According to the letter of revocation, (That decisive letter of revocation in Grenada Today, pg 11): (i) Cap Bank LENT a lot more than it should have to ONE entity – i.e. Cap Bank BREACHED THE LIMIT set by the Banking Act for large exposure to any one borrower or group of borrowers. Native Hut was one of those entities! Who are the owners, operators, shareholders to whom Cap Bank lent this money? Mr. Finton DeBourg and other associates!! (ii) The property securing the $18.7million loan to Native Hut was not adequately insured. (iii) Cap Bank Intl. did not maintain the minimum paid up or unimpaired capital of $5million as required by the Banking Act – this requirement was meant to ensure that when depositors want their money, they would be able to get it. We the people should therefore ask WHOSE INTERESTS were the operations of Cap Bank serving? Was it the interests of the “small man” or was it the interests of Mr. Finton DeBourg and his various associates? Re-organisation of the Bank: -------------------------------- I am UNEQUIVOCALLY OPPOSED to the re-organisation of the bank. There is NOTHING about the BANK’S PAST which suggests that it ought to be given a second chance. The sooner Grenada resolves this ANOMALY that has been allowed to fester within its financial system, the better for the country. Grenada is part of a regional currency union. The founders of this union, very wisely, insulated the Eastern Caribbean Central Bank from political interference, granting the bank and its Governor immunity. This has worked to the advantage of the countries within the currency union whose operations are a MODEL for the world. What happens in Grenada not only affects Grenada but also affects the integrity of the wider currency union of NINE countries. Secondly, Grenada is not looked upon favourably by the international community given the offshore banking scandal which occurred in the late 1990’s, early 2000’s. It is interesting that when the New National Party Administration and then Finance Minister, Anthony Boatswain committed to a structural reform programme (another way of saying STRUCTURAL ADJUSTMENT) in 2005, one of the conditions agreed to with the International Monetary Fund was REGULATION OF THE UNREGULATED BANK by June 2006. It is significant that this benchmark re regulation was not part of the public information circulated in the Budget and other documents to the then Parliamentary Opposition and the general public. Also significant is the fact that in June 2006 - the date set for the regulation of the bank - Cap Bank was officially opening its South City Plaza headquarters and associated businesses – the Native Hut connection – at which then Prime Minister, Dr. the Rt. Hon. Keith Mitchell and then Minster of Tourism, Brenda Hood made grand speeches. It was then that Mr. De Bourg also announced plans which threatened the people’s property, i.e. the Grand Anse tennis, basketball and netball courts. I have no doubt that the timing of action against the bank by the former NNP administration was linked to the then supervisory visit of the International Monetary Fund. Up to that period, Grenada had not yet received any of the allocated funds from the IMF. It would appear that Minster Burke, too, has very little choice in this matter. The Capital Bank matter goes way beyond the interests of 518 depositors, callous though this may sound. It is about the long term interests of the financial integrity of the currency union of which Grenada is a part ( and this affects ALL the people of the sub-region) and how Grenada is perceived by international institutions and its participation in the programmes of these institutions. Minister Burke must not take a POLITICALLY POPULAR decision. Difficult and unpopular decisions have to be taken in this matter TO RESTORE INTEGRITY to the financial system of Grenada for the BENEFIT of ALL Grenadians including “the little man”. In the interests of the depositors, particularly, the “small man”, perhaps at some point in time in the future, a bail-out plan for depositors could be considered by Parliament. The question would be where is the money to come from? In respect of large depositors, who were obviously looking for “investment opportunities”, they could be offered GOVERNMENT BONDS, payable over a number of years. That would be extremely generous and thoughtful on the part of we the people. And can some action be brought against the Ministers of the former administration who got Grenada and the depositors into this mess? GRENADA DESERVES BETTER! LET US STAND UP FOR GRENADA!! By Sandra Ferguson (The views expressed in the above article are those of the writer and not necessarily that of the Inside Grenada Staff).