The government is monitoring the operations of Clico (Guyana) “closely” in the wake of the liquidity problems at its Trinidad-based parent company CL Financial Limited.
“We are looking at it closely,” President Bharrat Jagdeo told reporters at a news conference at State House yesterday, indicating a cautious approach nearly a week after Trinidad and Tobago took control of some subsidiaries of CL Financial to bail them out. Those were Clico (Trinidad) Limited, Clico Investment Bank Limited, CMMB and British American Insurance Company (Trinidad). CL Financial has said the Clico (Guyana) subsidiary has not been affected, while the local operation continues to assure that it remains solid and that its statutory fund was in good standing.
“We want to ensure that people here, their interests are protected so we are watching this closely,” Jagdeo declared. The President said he looked at Clico (Guyana’s) liquidity position as well as its assets and liabilities. He noted that Clico (Guyana) makes up just three percent of the country’s total financial assets.
He explained that the company holds its assets while a significant amount of its liabilities are long-term and even if people make a run on it, it would not face a problem of not having enough assets to match the liquidity. “But you may have a situation of cash flow liquidity problems,” he said, adding this would be the problem faced by any major bank in any part of the world in a similar situation.
Jagdeo added that the only problem he could envisage in the short term is a mismatch between liabilities and assets in the event of significant changes of the company’s investments abroad. “But we are paying close attention to the issue,” he said, adding that the government would continue to monitor the developments.
Trinidad and Tobago’s House on Wednesday approved changes in legislation to facilitate the Patrick Manning administration’s announced bail-out of CL Financial. It was to be voted on by the Senate last night. Clico lnvestment Bank Limited 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, Clico Trinidad backed by assets of CL Financial Limited.
The Guyana Association of Bankers has said the country’s financial sector is insulated from liquidity issues affecting financial institutions in any foreign jurisdictions, adding that the level of liquidity in the local banking system remains very high. It cited 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,” it said in a statement last week.
