Aug 2010 Financial News

CEO: Beware of hampering competitiveness...in the name of regulation

Aug 23, 2010

LOCAL and regional regulators of the financial system need to be careful that they do not impose too heavy a burden on financial institutions, thereby rendering them uncompetitive when looking to venture into markets outside of their original jurisdiction.

This was the advice given by Group President and CEO of Sagicor Financial Corporation, Dodridge Miller, who was questioned about the issue of financial regulation during a media conference last week at their Wildey, St. Michael office.

Since the developments surrounding the Trinidadian company C.L Financial and its regional affiliation of companies carrying the “CLICO” name came to the forefront, there have been calls made for an enhancement of the regulation of financial institutions that operate in the Caribbean.

The argument for this is that these operations need to be carefully monitored to ensure that all activity involving the hard earned money of policyholders and customers remains above board, and that their investments are protected. Another argument made is that misconduct could result in a crippling of financial systems and subsequently the economies of the region.

Although these are valid reasons, Miller cautioned that any regulatory measures that are too onerous on the institutions could have the same end result, given that their growth could be stifled, and their viability placed in jeopardy.

“I’m seeing, and I’m sensing that the region is reacting to that environment, and are looking to overlay on companies a level of capital burden that, to me, is not sustainable”, he said.

“We are seeing regulators wanting to suggest that the capital on products, and the capital for assets backing those products, need to go up considerably.”

He argued that if we in Barbados and the region really want these companies to be able to compete internationally, then overlaying on them capital burdens that do not exist anywhere else in the world will certainly condemn them to a position where they cannot compete beyond the narrow geography that they are in.

He referred to the example of Jamaica, stating coming out of the financial crisis there in the late 1990s, an additional burden on the environment and the institutions that operated within it was imposed, which resulted in the capital requirement for financial institutions being above that seen in places such as Canada.

As a result, he made the point that “if a Jamaican company and a Canadian company had to be competing for the same business, the Jamaican company couldn’t win, because it wouldn’t be competitive, and that to me is an issue that we need to look at.”

“We need to look at capital regimes that fit our environment, our risks, and the instruments that we have to address those risks,” he explained.

“We’re committed to working with the regulators as a responsible financial institution in this region to resolve some of these issues,” Miller stated. “At some point we will be addressing this with the regulators directly, but we’re seeing a reaction which, to me, is not going to be in the best interest of the competitive environment that we’re in.”


Source:
By Randy Howard
Barbados Advocate
Monday August 23, 2010

http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=12251