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Divestment of NCB: An opportunity to educate the Nation on Finance

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Fri, Oct 8, 2010

Editor: The recent announcement by the Government of their decision to divest 51% interest of the National Commercial Bank to ECFH, the holding company of Bank of St. Lucia, and later to divest a further 29% to the general public, NIS and the staff of the bank, is coming at a critical time in our country’s development. It’s unfortunate that the divestment is coming at a time when the country is politically charged, pending a general election.{{more}} However, we must not miss the opportunity to lift the financial literacy of our people, especially in this month which is designated as “Financial Information Month” by ECCB.

For those who know better, hundreds of Vincentians have lost significant sums of monies, including their lifelong savings, in British American Insurance and the CL Group, where they went after the highest interest rate and lodged all their “eggs/ money” in British American Insurance and CLICO baskets. The process of divesting or selling shares of NCB means that there will be a public offering where these shares will be traded on the East Caribbean Stock Exchange (ECSE). It is, therefore, incumbent on us to educate our people on the functioning of the ECSE and the need to spread your investment/ money to ensure that all your eggs/ money are not in one basket, so if you end up losing your money in one company/ investment as in the case of the collapsed of British American Insurance, you will still have your other investments to live on.

Long road to stable growth

Editor, the financial environment today is far from what existed in 2000. Our currency union is still battling from the effects and fallout of the global financial crisis in the developed countries in 2008. Latin America Monitor, a trusted source for business information and intelligence on global markets, including the Caribbean, in their magazine vol 27 issued in September 2010 indicated that “the path back to stable growth will be long and challenging” for the OECS. Their prediction is for another few challenging years ahead because of the weak prospect for recovery of the tourism and the financial sectors.

Sir Dwight Venner and the ECCB presented an eight point stabilization and growth programme to mitigate the impact of the effects of the 2008 financial meltdown. Dominican-born ambassador His Excellency Charles Maynard told SKNVibes of St. Kitts that he is pleased with the “immediate and outstanding” actions taken by the Central Bank to avoid any further meltdown of the financial sector in the Eastern Caribbean Currency Union (ECCU). Point sixth of the eight point programme focused on creating a financial sector safety nets which became critical because of the effects of the CLICO, British American Insurance Company and Bank of Antigua crises. These events have placed significant pressure on the currency union liquidity levels. The seventh point focused on the proposed amalgamation of indigenous banks, which is an attempt to create one bank which would be better able to face the rigors of the financial environment. It is from this backdrop we need to see the importance of the divestment of NCB.

Access to larger amount of capital

The uncertainty in our global environment means that the divestment must go beyond sentiments of broad base national ownership to focus on two other key issues; the value added the new owners will bring in terms of access to larger amount of capital and to capitalise on the competitive advantages from systems and processes alignment, and most important the provision of a safety net to battle the rigors of any turbulences if the financial environment were to worsen. ECFH and Bank of St. Lucia with over EC $2 billion in assets and a portfolio that is very diversified is better suited to face any unforeseen turbulences we may encounter in the short or long term based on our vulnerability as small open economies.

While the public discussions have been on the NCB, there are a lot of indigenous financial institutions in SVG and in the currency union that are worse off than NCB. However, they lack the political or other will to move in the direction as our government. God forbid, any deterioration of the financial environment could have serious implications, even threatening their own survival and their ability to deliver the current level of services they have been providing. Maybe then we will see and appreciate the wisdom of Prime Minister Gonsalves and the government to create an alliance with ECFH and Bank of St. Lucia to create an appropriate safety net and the value added which NCB could leverage on to make it a bigger and more efficient bank.

Cerlian “Maff” Russell