FRAMEWORK FOR FINANCIAL SECTOR RESTRUCTURING

Intervention

The banks in which FINSAC has intervened are:

Commercial Banks

• Citizens Bank

• Eagle Commercial Bank

• Island Victoria Bank

• Workers Savings and Loan Bank

• National Commercial Bank.

Merchant Banks

• Eagle Merchant Bank

• Fidelity Finance Merchant Bank

• Island Life Merchant Bank

• Intercontinental Merchant Bank

• Partner Merchant Bank

• Billy Craig Merchant Bank

• Corporate Merchant Bank

• Caldon Finance Merchant Bank

• Horizon Merchant Bank

FINSAC was mandated to restore the financial sector to health through 3 phases:- Intervention, Rehabilitation and Divestment.

Intervention has been through:

·    Outright acquisition by FINSAC of institution's shares in return for payment of an agreed amount, and in some cases, assumption of its liabilities

·    Purchase of   non-performing loans from institutions in return for the issue of new shares to FINSAC

·    Injection of capital through issue of preference or ordinary shares by the institution

·    Payoff of deposit liabilities through new accounts in other "good" banks.  FINSAC provides assets to "good" bank to back these liabilities.  FINSAC assumes depositors' claims against "bad" bank and moves to wind it up

Rehabilitation

This phase is intended to resolve the crisis by restructuring the sector to ensure that it is better capitalised, better supervised and guided with better management capability supported by superior corporate governance through:

•       Orderly re-capitalisation and restructuring of entities in which FINSAC has  intervened.

•       Winding up of entities which cannot be restored to viability.

•       Reducing the number of companies through mergers and reorganisation for a better fit given the size of the economy.

•       Rescheduling and/or adjusting debt obligations of customers, particularly those in productive enterprises, to maximise collections and facilitate recovery of productive enterprises.

•       Facilitating regulatory improvements

•       Promoting corporate governance, managerial accountability and shareholder oversight.

•       Strengthening institutional management, particularly financial management (asset and liability management).

•       Strengthen loan portfolio management

•       Implementing superior internal accounting controls to minimise the high levels of fraud in locally owned banks.

•       Institutionalise best practices by benchmarking against international standards

•       Reclaiming assets by establishing fraud and civil claims

•       Facilitating sales or liquidation of non-core assets

•       Improvements to management information systems

FINSAC through its wholly owned subsidiaries, Refin Trust Ltd. and RECON Trust Ltd. purchased $21.9B in bad debts and manages $11.5B for other intervened institutions to date.  This represents a major part of the Company's investment in the banking sector.  Throught the Non-performing Loan Unit of FINSAC, collection of these amounts is pursued on behalf of Recon Trust and Refin Trust.

Divestment

FINSAC's ultimate goal is to return companies it controls in a healthy state to well qualified private sector purchasers in a quick, orderly and transparent manner.  In so doing the company is guided by the following objectives:

·       Minimise loss in resolution of institutions in which FINSAC has intervened.

·       Avoid depressing the real estate market in disposing of the significant real estate  portfolio in FINSAC hands

·       To ensure optimal size and capitalisation of the financial sector

·       To attract new capital to the financial services industry

·       To promote simple financial sector structures in the short run, to minimise  contagion facilitated by complex structures

Divestment Criteria

There are stringent criteria for purchasers.  Potential purchasers must have management and financial resources to:

·        Execute a good business plan

·        Offer a competitive price

·        Access technical expertise

·        Offer technology transfer potential

·        Market Access

·        Ability to capitalise the entity

·        Meet enhanced fit and proper criteria

Institutional Strengthening

Stakeholders in the financial sector have an opportunity at this time of challenge and adversity, to carve out a viable and sustainable industry which can properly fulfill its role as the engine of growth for the rest of economy.  As such, the Government, through FlNSAC, will be fostering:

·       A set of strong and well-capitalised institutions adequate to the size of the national economy.

·        An effective regulatory framework and efficient supervision to ensure best practices in the banking sector and protection of depositors funds.

·        A clear separation of ownership and management of deposit taking institutions and other commercial enterprises, i.e. a concentration on core business by financial institutions.

·        A move away from complex group structures in the medium term.

·        Replacement of Government's 100% guarantee to depositors with deposit insurance to minimise moral hazard.

For their part, directors, shareholders and officers of deposit taking institutions have a responsibility to be guided by:

·        The highest level of integrity in their business practices.

·       Compliance with the Banking Act, the Financial Institutions Act as well as all  other relevant laws.

·        Their duty of care and good faith in the handling of depositors funds.

·        Corporate Governance of the highest level.

value your feedback and comments.
Looking for something in particular? Search Our Website.

Technical Problems, Comments, Questions? E-mail Webmaster