Jamaica is part of efforts by regional authorities to determine the real size of the financial hole - estimated at up to US$2 billion - being left by the meltdown of the Trinidad-based Caribbean conglomerate, CL Financial Group, and Kingston has promised to help guide the development of a supervision mechanism for Caribbean Community (CARICOM's) financial markets as well as Pan-Caribbean firms.

"Jamaica is offering its assistance because we are, perhaps, ahead of the other Caribbean countries in terms of the strength and sophistication of our regulatory mechanism," Prime Minister Bruce Golding told the Government's Jamaica Information Service (JIS), following last weekend's summit of CARICOM leaders in Belize.

The heads of government of the 15-member trade and economic cooperation group were forced at their two-day meeting to con-centrate on the financial super-visory issue in the face of the debacle at CL Financial, as well as the claim by America's Securities and Exchange Commission (SEC) that US financier, Allen Stanford had bilked investors of nearly US$9 billion, through his Antigua-based Stanford International Bank.

A contagion run

Stanford, who had wide-ranging business interests in Antigua and was the island's largest private employer, faces civil fraud charges for allegedly misleading investors. The East Caribbean Central Bank was forced to take over Stanford's domestic Bank of Antigua to prevent a contagion run on banks across the nine members of the Organisation of East Caribbean States (OECS), over which the ECCB has jurisdiction.

In the case of Lawrence Duprey's CL Financial, the Trinidad and Tobago government had to rush to its rescue at the end of January when its insurance company, CLICO and its Clico Investment Bank (CIB) found themselves well short of assets to cover liabilities, initially exposed when depositors began to make large withdrawals.

CL Financial - built from a small insurance company started by Duprey's uncle - had businesses across the Caribbean, including in Jamaica where it owned 40 per cent of the brokerage house, Jamaica Money Market Brokers (JMMB) and around 90 per cent of the conglomerate Lascelles deMercado, which it acquired last year.

In exchange for the intervention by the Trinidad and Tobago government into CLICO, CIB and his British American Insurance Company, Duprey handed over CL's controlling interest in Republic Bank, as well as stakes in two methanol plants.

Complex unravelling

However, the Trinidadian authorities say the company's financial arrangements and network of ownership are complex and will demand complex and intricate unravelling, including across CARICOM.

Last month, CARICOM regulators began to work at this task. Their effort was formally endorsed in Belize by the leaders.

"With respect to the CL Financial Group, heads of government have determined that this is a regional problem which warrants a regional solution," leaders said in a statement. "They have, therefore, agreed to collaborate in the search for a fair and favourable resolution of this issue."

Greater coordination

Once regulators have determined "the full scope and location" of CL's assets and liabilities, the leaders promised to "meet immediately" to consider their report "and to take the necessary action in the interest of all stakeholders".

The CL and Stanford fall-out have prompted calls for greater coordination and synchronisation of rules, if not the launch of a single oversight body, among CARICOM's financial regulators to combat what Trinidad and Tobago's central bank governor called the "systemic failure" represented the CL affair.

With most CARICOM members having signed on to a pact to transform the community into a seamless market, and ultimately a single economy, concerns are that with more companies operating across the Caribbean, the contagion effect from meltdowns of the kind that affected Duprey's company will be more likely in the absence of robust regulatory arrangements.

"The experiences relating to the CL Financial Group and the Stanford Group of Companies have demonstrated the need for strengthening the regional regulatory framework, particularly in the non-bank financial sector," the heads of government said in their statement.

This is an area in which Jamaica believes it has particular experience and skill to offer its CARICOM partners, having been forced to overhaul its regulatory system after the mid 1990s collapse of banks and insurance companies. Like the CL Financial Group, Jamaican firms became overburdened with debt, having, in part, used short-term cash to fund long-term projects.

"We have offered to make available our own experience and expertise in that regard," Golding said.

business@gleanerjm.com

SOURCE: Financial Gleaner, Friday, March 20, 2009