Jamaica Gleaner
Published: Sunday | March 1, 2009
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Stanford affair and Caricom
Two recent events have reinforced our belief in the need for an urgent summit of Caribbean Community (Caricom) leaders to address the global credit crisis and its consequential effects on Caribbean economies. The events provide the community an opportunity to signal, from the highest level, a wish to synchronise the regulatory framework.

The more recent, and clearly more notorious of these developments, was the decision by the United States Securities and Exchange Commission to bring civil charges against billionaire financier, Sir Allen Stanford, and two of his companies, for allegedly operating a US$8-billion fraud on investors in certificates of deposits sold by his Stanford International Bank.

That bank is based in Antigua where Sir Allen, a Texan, has citizenship and substantial business interests, and is the second-largest employer in the country after the government. But Stanford's is not the only offshore bank or similar institution operating in Antigua and Barbuda. They are important to the Antiguan economy, as they are to a number of other Caribbean countries.

Indeed, other Caribbean countries want to establish themselves as international banking and financial centres, even if not on the same model of the older jurisdictions, which in the past have been criticised for secrecy laws and allegedly poor oversight. Not least among the hopeful entrants are Jamaica, and Trinidad and Tobago, which are now shaping legislation. The Stanford affair will make their efforts far more difficult.

Added pressure

So far, Sir Allen has faced no criminal charges and the claims against Stanford and his organisation, hyperbolically vented in the American press with an absence of clarity, are that the CDs they offered - at as high as 15 per cent per annum - were at improbable returns and most likely invested in illiquid ventures, instead of easily realisable assets, as claimed.

We make no judgement on whether Sir Allen lied and/or committed a fraud. However, this affair adds pressure to small, vulnerable countries like those in this region, to put aside ambitions to host global and/or offshore financial services and similar industries. Indeed, Antigua and Barbuda had to win three times at the World Trade Organisation against the United States in its internet gambling case for its victory to be recognised.

The second issue, of course, is the faltering in Trinidad and Tobago of Lawrence Duprey's CL Financial, whose holdings account for perhaps 10 per cent of the country's GDP and has substantial impact elsewhere in Caricom. The Trinidad and Tobago government has moved to bail out the financial entities and the group's shares in some of its other entities have been ceded to the state.

Deepening integration

As is the case with the situation in Antigua - where the Eastern Caribbean Central Bank has had to take over Sir Allen's domestic Bank of Antigua - the CL Financial issue will exacerbate the effects of the worldwide recession. This is especially so given the deepening integration of regional economies as part of the Caricom project. CL Financial, for instance, holds 40 per cent of a Jamaican investment bank and other regional firms are heavily invested here.

It is important, therefore, that Caricom begin to frame a response to these issues and the wider crisis, at a pace much faster than the committee established by regional finance ministers at their January 13 meeting.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.

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