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Central bank governor explains why banks were taken over

Sir Dwight explained that “this in turn has resulted in the banks not meeting their capital requirements.”

The two banks were identified as the Caribbean Commercial Bank (Anguilla) Limited and the National Bank of Anguilla Limited.

The Central Bank Governor also indicated in an official statement released to the media on Tuesday, 13th August, 2013, that the circumstances under which this action has been taken, were also driven by the poor performance of the economies of the Eastern Caribbean Currency Union (ECCU), which are mainly dependent for their growth on two sectors, tourism and construction.

Venner added that the global crisis has also had a major impact on these sectors, with growth in Anguilla virtually collapsing, falling from an average of 15.8 per cent  between 2005 and 2007 to an average contraction of 5.5 per cent for the period 2008- 2012.

Venner confirmed that the action by the Eastern Caribbean Central Bank, was only executed after due consultation with the Monetary Council of the bank. He said the powers to do so are contained in Part11A, Article 5B of the ECCB Agreement Act 1983. The ECCB has regulatory authority over the banks within the countries that are part of the Organization of Eastern Caribbean States.

The Central Bank Chief Executive Officer provided some background on the decision, saying “Over the last two years, the banks have been under very close supervision by the ECCB. The Central Bank has had several onsite inspections of the two institutions and their Directors and Managements have visited the headquarters of the ECCB for consultations. A major diagnosis of the banking sector, including these two banks, was conducted in 2011 by the Task Force on the ECCU Financial System chaired by the ECCB with the International Monetary Fund (IMF), The World Bank, the Caribbean Development Bank (CDB) and ECCU government representatives as members. The results heightened concerns over the operations of the banks.”

The Monetary Council, in response to the results of the diagnosis, directed the Central Bank to prepare a comprehensive resolution strategy which was subsequently approved by the Council.  As concern grew over the performance and condition of these two institutions, the Monetary Council’s Ministerial Sub-committee on Banking met on several occasions to receive updates on the situation. The Foreign and Commonwealth Office of the British Government was also engaged in these discussions and subsequently the IMF and The World Bank. The case for intervention was finally presented to the Ministerial Sub-committee on Banking, which accepted it and made the recommendation to the full Monetary Council.

The objective of this action is intended to:

1. Stabilise and restructure both banks and return them to a state of normality;

2. Protect depositors and creditors; and

3. Ensure the stability of the banking system in Anguilla and by extension the entire currency union.


 

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