Mar 2009 Financial News

To buy or not to buy BNB

Mar 09, 2009

STATE CONTROL of Barbados National bank (BNB) can help Government stave off the worst effects of the global financial and economic crunch.

This is the view of University of the West Indies (UWI) political economist Dr Don Marshall.

But at least three prominent thinkers - chartered accountant Douglas Skeete, international financial consultant Professor Avinash Persaud and UWI Professor Michael Howard - have advised Government against seeking majority ownership in BNB.

Marshall said in an interview that majority state shareholding could be "the last bulwark of self-defence in the event that there is a run on any institution or industry" facing financial and economic trouble.

The bank could be used to facilitate a bailout, he said.

"The Minister of Finance needs to know that he has greater policy autonomy and policy flexibility in terms of access to a national financial institution to protect the financial wellbeing of the citizenry," he commented.

For a rainy day

A bid for local control of BNB should be part of any preparation "for a rainy day in our economy", Marshall argued.

Government once had the majority of shares in BNB but that shareholding has dropped to 18.17 per cent - 17 446 596 shares. The National Insurance Board (NIS) holds 9 600 000 shares, or ten per cent.

Trinidad and Tobago's Republic Bank Limited is the major shareholder, with 62 529 647 shares, a 65.13 per cent stake.

Prime Minister and Finance Minister David Thompson says he wants to see Barbadians take back majority ownership of BNB but with credit unions and other groups - rather than Government - buying up the shares.

Noting that the public purse is not overflowing with money at this time, Professor Persaud said: "I would say that today there are much better ways of spending money than buying BNB."

Professor Howard, an economist, argued that "Any attempt by the Government to purchase the Barbados National Bank would not be considered a wise decision in context of the global recession facing the Barbadian economy at this time."

He added: "The decision to buy a commercial bank should not be based on nationalistic or jingoistic considerations. Risk-management institutions like commercial banks should be purchased or sold primarily on the basis of sound economic and financial analysis."

Skeete, who raised similar points, also said Government can face some problems in convincing credit unions, other groups and individuals to buy into BNB.

Credit unions are constrained by law to limit investments in shares and property acquisition, he noted.

"You would have to change the legislation for the credit unions to get involved in the type of investment we are talking about, otherwise that is not going to work," he said.

He also recalled that Government had ended up selling a large chunk of its shares to Republic Bank because of lukewarm response from the public. There was no guarantee that this time Barbadians will be keen to buy back shares, he said.

"I don't feel the private sector would want to be part of a scenario where one entity by itself would not be able to wield the major influence," he said. "They would want 51 per cent of the shareholding."

However, he pointed out that the issue of a Barbados "buy-back" was just for debate because the Republic Bank shares, which have come under the Trinidad government's control as a result of its bailout of the CL Financial group, may not come up for sale.


Source:
Trevor Yearwood
Nation News
Sunday March 8, 2009

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