The sale of NCB – Let’s move forward

Fri, Oct 8, 2010

After all the speculation, the divestment of the state-owned National Commercial Bank is now a fait accompli – a done deal. Prime Minister and Minister of Finance Dr. Ralph Gonsalves made this announcement on Monday of this week, disclosing that 51 percent of the shares of the Bank had been sold to the Eastern Caribbean Holdings Company, the parent company of the Bank of St.Lucia.{{more}} This is but the first step in the divestment process, for according to the Prime Minister, a further 29% of the shares is to be sold, as soon as within the next six months. The bulk of these shares is to be sold to the public, with 5% to be offered to the National Insurance Services and 4% to NCB staff. The government is to retain the remaining 20% of the shares.

Given the politically charged atmosphere in St. Vincent and the Grenadines, the transfer of majority ownership of the bank out of the hands of the State has become a political issue. Opposition Leader Arnhim Eustace has charged that the sale is a “forced deal”, not a well-intentioned privatization, brought about by mismanagement of the bank by the Gonsalves-led ULP administration. He has also alleged that the EC$42 million Government received for the 51% of its shares is less than should have been realised, given the stated assets of the Bank. Mr. Eustace has therefore called for more information about the agreement. This is a reasonable call, which should be answered, so that we can all feel more at ease about the price paid.

The NCB has long been used as a political football and, if truth be told, sometimes as a convenience by successive administrations. Whether this is one of the factors which led to the decision to sell off the majority of shares or not is today a moot point. The fundamental question which must be answered is whether this divestment is in the best interest of the Bank and the people of St.Vincent and the Grenadines as a whole.

Ironically, there is some contradiction in the arguments of those criticising the sale, for surely, if by possessing sole authority over the Bank the Government was in a position to abuse its power, then divestment of the shares is a guarantee that no future Minister of Finance/Prime Minister can give direction beyond prudent limits.

It is instructive to note that divestment of the Bank’s shares has been on the cards from Day One. Our first Prime Minister Milton Cato, under whose aegis the Bank took shape, made that plain in his very address at the Bank’s official opening. His successors as Prime Minister during the 17-year reign of the New Democratic Party both committed themselves to privatization. So we can quibble about whether the marriage was “forced” or not, but strategically, the benefits to be derived by the country, from this step, are clear.

This is a world of mergers and acquisitions. Small stand-alone banks will not be able to withstand the competition, and all over the globe banks are seeking alliances to strengthen their financial bases and outreach. In addition, we in the Caribbean are committed towards building a Single Market and Economy. In the small-island OECS in particular, pooling of resources is even more critical. It is in recognition of this fact that about one year ago, OECS governments, under the aegis of the ECCB Monetary Council, endorsed an eight-point growth and stabilisation programme. Item 7 on that list spoke to the need for “Amalgamation of Indigenous Banks”. Among the reasons given were being able to build institutions strong enough to be able to withstand stormy financial weather and to be able to provide customers with access to capital that small banks would not be able to provide.

A forward looking approach is what is required in today’s world. The emotional talk of “selling our bank” will not help us at this stage. We need to be able to move forward, recognising our strategic interests and how best to advance them.