This document summarizes and responds to a presentation on recent developments and challenges in the ECCU banking sector. It acknowledges the comprehensive nature of tracking changes in the banking industry. While validating points made in the presentation, it argues that the totality of sector events and changes were not fully represented. Specifically, it highlights five significant developments not mentioned: 1) The 2009 collapse of CLICO and BAICO and its lasting impacts. 2) The 2009 Stanford debacle and establishment of ECAB. 3) The 2011 St. Kitts-Nevis bond default. 4) Recent bank interventions. 5) Increasing consolidation in the industry through mergers and acquisitions. It commends the effort while advocating considering these additional important developments

1. 25th
Annual Conference with Commercial Banks
Response to presentation on Recent Development and
Challenges in the ECCU Banking Sector
Thursday 6 November 2014
Henry Hazel
I wish to commend the author/presenter’s efforts to capture and chronicle
significant developments of recent times and major challenges in the ECCU
banking sector. We all know that since the start of the 2007-2012 global
economic and financial crisis, the reality of a rapidly changing world of banking
became immediately apparent. The forceful velocity of unfolding events and
attendant challenges to banking sector participants, now renders the
comprehensive tracking and monitoring of these developments a major discipline
in and of itself. Within this context, I think that it is permissible for me to say that
the paper merely scratches the surface of such an important topic. Deep
reflection and contemplation on even a narrow range of this subject matter
would reveal a multiplicity of occurrences within the ECCU banking sector domain
that could easily be classified as epic in our specific context. The discussions of
late in most, if not all, of our boardrooms, along our corridors, at the networking
hubs, and the various high level meetings, all centre around the fundamental
conclusion drawn just five to seven years ago: banking is not like what it used to
be!
The points on recent developments and challenges proffered in the paper are
certainly valid. However, the presentation of said points easily misrepresents that
the totality of the sector-related events and changes are embodied in initiatives
undertaken and/or directed by the Monetary Authorities. The exposition on
supervisory initiatives in Europe, India, Barbados, Trinidad and Tobago and
Jamaica seemingly represents the author’s full account of banking sector

2. happenings and transformations in these jurisdictions. The same holds for the
ECCU with the added mention of operational adjustment at some banks to
strategically counteract declining earnings. Notwithstanding the significance and
cogency of that detail as presented, there are yet some non-ECCB related
happenings and experiences that are indispensable to any discussion on recent
developments in the ECCU banking sector. Permit me to highlight a few which, if
properly enunciated in the paper, would make for a more meaningful and
enhanced discussion on the subject matter of recent developments and
challenges.
(1) The collapse of CLICO and BAICO in January 2009, which previously
extracted billions of dollars from the banking system, created great pains at
both institutional and house levels across the ECCU domain. The
magnitude of the fall-out and the financial resource requirement for proper
resolution even created very uncomfortable tensions among the leaders of
our Caricom member-states. To this day, banks have not yet fully
recovered from the impact which has triggered massive overhauls of
investment policies and strategies, and shrank the pool of options for
investible funds. Together with the financial meltdown in the US and the
UK, where ECCU banks once ventured to deploy excess liquidity, the
CLICO/BAICO debacle can easily be considered the single most significant
causal factor of our present day excess liquidity crisis. Faced with negligible
demand for credit, banks are pressured into committing the cardinal sin of
warehousing of cash!
(2) The Stanford debacle in February 2009 which caused the demise of Bank of
Antigua and gave way to the establishment of Eastern Caribbean
Amalgamated Bank, is still very fresh in our minds. The drama of the
deposit run, the grandeur of the life-changing ramifications and the beauty
of the decorous display of ‘an indomitable spirit and will to survive’
demonstrated by the leaders in the banking sector, have all made their
indelible markings. Coming out of the ashes of a failed Bank of Antigua, the

3. launch of ECAB remains one of the most epic moments in the history
banking in the ECCU.
(3) The St Kitts-Nevis bond default of 2011 has created overtones that both
banks and bank supervisors are still grappling with. The perception of the
safety of government paper of long tenures has been severely damaged
and the prudential consideration of government exposure as zero risk-rated
for capital adequacy purposes is undergoing a revisit. Similar to the
CLICO/BAICO fiasco, this unprecedented bond default that occurred on the
yet fledgling stock exchange, has created problems of options and choice
for banks eagerly looking for avenues to channel rising liquidity.
(4) The supervisory intervention of ABI Bank in 2012, and the two indigenous
banks in Anguilla (NBA and CCB) in 2013, is also historic and
unprecedented. The motivation behind the assumption of control of these
banks was somewhat different to that which prompted the intervention of
Bank of Antigua. This development showcased a radically different stance
on the part of the regulator in pursuing the objective of safety and
soundness in the banking system, as well as the severe challenges faced by
the Monetary Authorities in pursuit of said objective. Notwithstanding the
herculean efforts of the Central Bank, we all note with concern that these
banks remain unresolved today.
(5) Business consolidation and rationalization is taking on increasing
prominence in recent times. The merger of the Barclays and CIBC
Caribbean operations to produce the First Caribbean International Bank
was a phenomenal undertaking that carried powerful signals on the
direction of banking in our space. We later witnessed the complete exit of
Barclays pursuant to the sale of its ownership stake in First Caribbean
International Bank to CIBC. The point is, international financial
conglomerates are relooking their global footprint and the ECCU is
undoubtedly been affected by the new arrangements. Another classic case
in point is the RBC/RBTT transaction. Further, as recent as yesterday, Bank

4. of Nova Scotia announced plans to close 35 of its 200 branches in the
Caribbean, and sever 1500 employees, in a bid to save CAD$120M annually
(source: The Jamaican Gleaner).
The unfolding developments come with their related challenges and the
proposition of banking has clearly become, one might argue, a much more serious
consideration today relative to yesteryear. Good mention was made in the paper
of FATCA that has descended upon us and the fragility that costly correspondent
banking has taken on. Already exorbitant fixed overheads continue to mount
with increasing dependency on indispensable technological platforms, signaling
that rationalization must swiftly become the order of the day in our context. I
therefore commend the noting in the paper of the initiative to amalgamate the
indigenous banks and the chronicle of the progress made to date as a collective
significant development. The path of rationalization and consolidation that the
mega international banks have taken portends profound wisdom for our
comparatively micro indigenous banks for effective negotiation of the current
turbulent times. For these international banks, continued rationalization and
operational remodeling represent a strategic push on the frontiers of efficiency
for more profit, whereas it might yet be a struggle for survival for most, if not all,
of the indigenous banks. Notwithstanding, in my own estimation, the wheels are
already turning to fashion our arguably overbanked domain into a very balanced
rationalized space.
Again, I commend the good effort of the author and presenter of the paper; for a
take-away, we received an excellent description of prevailing conditions in the
banking sector. I accept that a full and comprehensive discourse on all that has
transpired in terms of notable developments in the ECCU banking arena in recent
times would be quite an undertaking. I therefore advocate some degree of
leniency regarding the omissions of the paper and encourage consideration and
inclusion of those obvious developments that are indispensable to this important
discussion, a few of which I mentioned in my earlier remarks.
Thank you kindly.