ANDRE BAGOO: 'can citizens trust that the Central Bank is in a position to fulfill its mandate?' Time for Ewart Williams to go.
CCDSJ_TT
Bagoo has presented an informative analysis of the bank's whining and excuses, reasons, scapegoating... the admission that moral suasion was their main strategy is sufficient justification for calling on Ewart Williams to do the correct thing - resign.
The Central Bank’s moral suasion
ANDRE BAGOO Sunday, July 3 2011
A KEY aspect of this week’s proceedings at the Clico Commission of Inquiry has been statements made by counsel for the Central Bank, Bankim Thanki QC. In an opening statement on Thursday morning, Thanki defended the Central Bank from widespread criticism over its role as a regulator which oversaw the CL Financial debacle which has been, arguably, decades in the making.
At CLF, Thanki said, there was an absence of corporate governance when there should have been. He said some aspects of the group were withheld from the Central Bank.
“This represented a serious breakdown in corporate governance,” he said.
“The illusion of corporate governance was given when in many cases it was absent and in many cases the full information was kept from the Central Bank.”
He argued that the Central Bank exercised “very diligent supervision” over Clico.
“There were honourable dedicated hard-working public servants wrestling with a very difficult situation,” he said.
“The history of the relationship between Central Bank and Clico shows very diligent supervision and Clico kicking and screaming from the scrutiny it faced from the Central Bank,” he added.
He argued that the Central Bank, with its finite resources and large scope of operations, was in a position where it was inevitable that it had to rely on others.
“The Central Bank has to place reliance on the work of auditors to a significant degree, as well as the management from the supervisory entity itself,” he said.
Given the sheer number of entities it was supervising, the “reliance on auditors is inevitable”. But given this, can citizens trust that the Central Bank is in a position to fulfill its mandate?
Thanki also noted that given “the nature and limitations of the Central Bank’s coercive powers …one can see the Central Bank is between a rock and a hard place”. But the Bank has persevered, using the time-tested tool of moral suasion to deal with the CLF group.
But at the same time, in relation to CLF, Thanki said the Bank was dealing with “an institution which could not care less about the Central Bank’s approval and is constantly saying to the bank, ‘show me your power to make me do this, show me your legislative powers’”.
But if indeed the Bank found itself in a situation where it was dealing with an aggressive institution outside of the net of its supervision, why persist, throughout the course of years, to employ “moral suasion”? If CLF was constantly saying, ‘show me your powers’ to the Central Bank, why think it can be won over? Was this not an alarm bell? While the company may have withheld information, was that entirely surprising given the stance of CLF?
Moral suasion might be relevant to the UK context where there are different rules governing the powers of regulators, but can it apply to a small country like Trinidad and Tobago where all the parties are likely to have links, financial or otherwise? Even if moral suasion was an appropriate tool, was it not clear that it was simply not working? Could the Bank, and successive Governors, including current Finance Minister Winston Dookeran and then Ewart Williams, have done better? Could the Bank not have foreseen that by doing little or nothing publically, while privately chatting up Lawrence Duprey and company, it was actually allowing the problem to deepen and expand? These are the questions that must now be answered.
Email:aba...@newsday.co.tt
http://newsday.co.tt/commentary/0,143258.html
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