Sep 2010 Financial News

Govt to pay Clico depositors $75,000 max—Minister

Sep 09, 2010

As he sought to bring relief to Clico depositors, the Finance Minister said the Government is willing to pay short-term depositors of Clico a maximum of $75,000. Minister Dookeran said this measure is would bring relief to 10,000 small depositors which include more than 140 credit unions and 15 trade unions. But depositors of Clico’s short term investment and mutual funds, who are owed more than $75,000, will be paid through a Government IOU amortised over 20 years at zero interest. “This Government IOU would be structured in such a way that it could be traded on the secondary markets, thereby creating a measure of immediate liquidity for the depositors,” he said. In his first statement on “ the Clico fiasco,” Dookeran described it as “most pressing issue in the financial system.”

Dookeran said the government’s intention is to restructure and merge the traditional insurance businesses of CLICO and British American and prepare this merged business for divestment. The cost of the Clico bailout, so far, is $7.3 billion. Dookeran said the cost of the payment of $75,000 to depositors is estimated at $1.5 billion over the next four years, as payments become due. The government, he said, will also provide $1.8 billion in the next fiscal year to provide a funding mechanism for the 20-year amortisation. Dookeran noted that as of June 2010, Clico and British American combined total liabilities were approximately $23.8 billion but assets were $16.6 billion.

In a bid to recover State money, Dookeran said the government would divest assets of CL Financial. This would include the divestment of Methanol Holdings Trinidad Limited (MHTL). “We are exploring the possibility of listing Methanol Holdings on an international stock exchange with a cross listing on the Trinidad and Tobago Stock Exchange. A critical component of such listings would be the distribution of a portion of population,” he said. Dookeran said the government will also seek a firm with relevant local and global expertise to assist with the restructuring of the CL Financial Group. “The impact on Trinidad and Tobago and the Caribbean was grossly underestimated. The intervention has cost the nation significant public funds. The problem involved more than ten per cent of the country’s GDP. It affects 250,000 of our citizens,” he said.

He slammed the former PNM Government for “a colossal, inexcusable, multi billion dollar mistake” which was “handled badly by the authorities from the start.” To prevent a repeat of this fiasco, Dookeran committed to strengthen the legislative and regulatory framework governing financial institutions and their holding companies. “We shall strengthen the enforcement of regulations through stricter oversight and compliance with the relevant legislation, including the Insurance Act. In addition, we shall amend the Central Bank Act to provide the legal framework to implement an economic solution and to subject our financial institutions to a higher level of control than currently exists.

“Furthermore, a legislative framework will introduce changes in the Central Banks powers to take decisive actions to protect CLICO’s assets and ensure the safe and sound continuation of its legitimate insurance business,” said Dookeran. The Finance Minister stated that those responsible for this crisis will be held accountable. The PNM government had hired Canadian forensic investigator Bob Lindquist to conduct a forensic audit of CL Financial and Clico.


Source:
Asha Javeed
Trinidad Guardian
Thursday September 9, 2010

http://guardian.co.tt/business/business/2010/09/09/govt-pay-clico-depositors-75000-max-minister