-CEO Singh-Knight
Following the dramatic takeover by the Trinidad Central Bank of some parts of the CL Financial Group which encountered liquidity problems, CLICO Guyana yesterday declared that it was solid and its statutory fund was in good standing.
In a terse statement issued yesterday afternoon after the news out of Port-of-Spain roiled the business sector here, Clico Guyana said it “wishes to make it clear that developments in Port of Spain, Trinidad (yesterday) involving CL Financial Limited have no financial impact on CLlCO Guyana. CLlCO Guyana is a separate entity within the CL Financial Group, and none of its assets are intertwined with CLlCO [TRINIDAD] or CLlCO lnvestment Bank.
“The facts are that CLlCO lnvestment Bank (CIB) has been sold to Trinidad and Tobago’s First Citizens Bank Limited, and the Government of Trinidad and Tobago will provide the liquidity to support any strain on the insurance company, CLlCO Trinidad backed by assets of CL Financial Limited.
“CLlCO Guyana remains solid with a statutory fund that is in good standing,” the CEO Geeta Singh-Knight said.
CLICO Guyana is one of the principal investors in the recently commissioned Berbice Bridge.
And in a statement issued at 11 pm, the Guyana Association of Bankers (GAB) welcomed the decision of the Trinidad Central Bank to intervene to support CL Financial Limited. It also said
“Our local financial sector is insulated from liquidity issues affecting financial institutions in any foreign jurisdictions. In fact, the level of liquidity in the local banking system remains very high as evident from reporting by the Bank of Guyana where at September 2008, the commercial banks held excess liquid assets of $29.6B or 71.6% above the required level.
“Given this fact, depositors can feel very confident and assured that the stability and integrity of the local financial system is guaranteed. The financial stability of the local banking system is equally guaranteed by appropriate regulations and supervisory oversight based on a risk management framework.”
GAB Chairman Radhakrishna Sharma said the association’s understanding was that the financial services within the CL Financial Group namely CLICO Insurance Company Limited (CLICO), CLICO Investment Bank, British American Insurance Company and Caribbean Money Market Brokers had faced “increasingly serious liquidity pressures” and had approached the central bank for relief.
GAB said it was confident that the efforts of the government of Trinidad would ensure the safety of the investments of depositors and policy holders.
Earlier in the day as news of the seismic developments in Port-of-Spain filtered down to Guyana, Minister of Finance, Dr Ashni Singh summoned CEO Singh-Knight and Commissioner of Insurance Maria van Beek to a meeting to ascertain the extent of exposure, if any, of CLICO (Guyana) to the events in Port-of-Spain. The Government Information Agency said that Singh-Knight confirmed that the CLICO Investment Bank would be sold.
“The Guyana company, which is also a wholly owned subsidiary of CL Financial, has assured the Minister of Finance that these developments do not affect its operations adversely as it has no investments or dealings with sister companies CIB or CLICO (Trinidad)”, GINA reported.
“Minister Singh requested that the company supply to the Commissioner of Insurance by Monday further information on the financial status of the Group, details of the transaction agreed with the authorities in Trinidad and Tobago, and of the implications of these developments for the operations of the Group as a whole and the Guyana company in particular”, GINA added.
According to the Commissioner of Insurance’s Annual Report for 2007, the amounts deposited by CLICO Guyana for the purpose of meeting the statutory deposit requirements were as follows: $18,750,000 for long-term insurance and $27,720,927 for general insurance for a total of $46, 470, 927. The audited figure for 2006 was $44,544,091.
CLICO Guyana was recently in the news after it challenged in the High Court the authority of the Insurance Arbitration Board to arbitrate in relation to a claim for $200M by the family of beheaded businessman Farouk Kalamadeen.
Letter
In his Chairman’s letter to shareholders in the 2007 Annual Report, CL Financial’s Chairman Lawrence Duprey was optimistic that his group would weather the gathering global financial storm.
He said “The U.S. subprime mortgage collapse, which started in the summer of 2007, has now morphed into the most serious financial crisis since the Great Depression of the 1930s. Solvency concerns about several major financial institutions have triggered a cascading series of bankruptcies, forced mergers and government interventions in the United States and Western Europe, which has resulted in a drastic reshaping of the financial landscape. Moreover, credit markets have been virtually frozen as trust in counterparties has evaporated. Many people fear that the economic consequences of the current global financial crisis could last 12-24 months and create conditions similar to the Great Depression.
I do not share this view. The world today is very different from the 1930s. Governments and businesses have learned from the mistakes of the past, and we have learned from each other’s experiences. We now have the tools to manage markets and economies which were not available almost eighty years ago. Most importantly, we have the will to use them. I am confident that we can emerge from this crisis with our economies and our societies intact.
“Across the world, central banks have injected extraordinary amounts of liquidity into economies; governments have arranged the takeover of key financial institutions to guarantee all deposits. Emerging economies, feeling the impact of contagion, are using their ample reserve cushions to weather the storm, while others are seeking liquidity assistance from multilateral financial institutions.
“We have already witnessed the willingness of several governments to break with precedent and try new approaches to stabilise financial market conditions. Increasingly, these approaches are comprehensive, attacking all aspects of financial market problems: liquidity, poor quality assets, shortage of capital, and especially confidence.
“There is now the growing recognition that a global problem requires a global solution. It requires active policy coordination such as a coordinated reduction in policy interest rates by major central banks and a plan of action endorsed by the international community that countries can use to support their financial system, jump-start credit, and restore confidence.
“But we still have a very long way to go. Prospects for world growth have deteriorated over the past year and we expect the world to get quite close to a global recession by the middle of 2009. The downturn is led by the industrial countries, the first such episode in the post-war period.
“Of course, Caribbean economies connected as they are with the U.S. economy – their largest trading and investment partner – are not immune to these events. Indeed, we anticipate a reduction in tourist arrivals and a slowdown in remittances. Another reality is that softening energy-based commodity prices will ease balance of payments pressures for many Caribbean countries but would have a negative impact on the budgetary and external positions of the Trinidad and Tobago economy.”
