FINSAc
and non-performing loans Dear
Editor, The
issue of the disclosure of information on non-performing loans acquired by
FINSAc
is one which has attracted considerable public debate. We have
consistently maintained that we cannot release this information, based on
legal considerations. In an effort to inform and perhaps place the issue
in the proper perspective, I will indicate in detail the legal
considerations which have led us to our position. The
background is as follows:
Most
of the commentators have correctly taken the view that as it is public
money which originally purchased the loans from the financial
institutions, any restructuring takes place at public cost. This, it is
argued, justifies the disclosure of information pertaining to the
restructuring of loans, especially where the beneficiaries of the loans
are "politically connected" people, without the need for FINSAC
to seek the consent of the debtors. Some
members of the public have simply argued for the disclosure of the
identity of the people indebted to FINSAC,
on the basis that the non-payment of these loans is part of the cause of
the financial sector collapse and these debtors must be held publicly
accountable. The
position which FINSAC has taken
is very straightforward. We have maintained that the law pertaining to
banker-customer confidentiality prevents us from disclosing the
information to the public. I note that some commentators have recently
said in the media that FINSAC
is not a bank and cannot therefore claim to be subject to the provisions
of the law on this area. They are wrong. While it is true that the Banking
Act does not govern FINSAC's
operations, since FINSAC is not
licensed under the Banking Act, the common law on this area is relevant to
the discussion. Perhaps
the most important principle which can be gleaned from the decisions on
this area is that a person who obtains information from a bank pertaining
to a customer's loan with that bank is subject to a restriction against
revealing this information without the consent of the customer or in
accordance with other legal provisions governing disclosure. For
example, an accounting firm hired by the shareholders of a bank to
investigate bad loans made by the bank was prevented from disclosing this
information to the central bank, as the court took the view that the firm
was subject to a duty of banking confidentiality owed by the bank to its
customers. (See Price Waterhouse v
BCCI Holdings (Luxembourg) SA [1992] BCLC 583). The reasoning behind
this decision is simply that someone who obtains information from a
financial institution must be subject to the same restrictions as the
institution that supplied the information. Having
obtained the loan information from the various banks from which we bought
the non-performing loans, we are similarly bound, under this principle, to
keep the information private. At
this point, I should advise the public that in 1998 FINSAC took the precaution of obtaining an order from the court
which permitted it to receive the loan information from the various banks,
in order to protect the banks from any challenge by their customers to the
release of the loan information to FINSAC.
That is the basis on which FINSAC
has this information, and the order was made in light of FINSAC's special role in stepping into the shoes of the financial
institutions from which it acquired the loans. In those circumstances, FINSAC
cannot act outside the order of the court by releasing that information to
the public without the consent of the debtors. The
arguments above are applicable irrespective of the identity of the debtor,
as none of the decided cases have sought to establish a difference between
private or public citizens. There is therefore no basis in law for public
figures to be denied their right to confidentiality in their private
affairs, except where this is expressly legislated for. I
have not so far raised considerations of public policy, as I do not wish
to focus on policy considerations in this letter. Those considerations
cannot however be ignored, as even if there were no legal constraints
binding FINSAC, the issue of
disclosure raises fundamental questions of public policy. I would say in
this regard that the recent decisions in the Jamaican and overseas courts
suggest that the public policy considerations which influenced the
development of the common law on banker/customer confidentiality over the
years have not changed. I
trust that by this letter, FINSAC's
position has been adequately explained. Patrick
Hylton Managing
Director FINSAC
Limited Kingston
5 July
14, 1999 We value your feedback
and comments.
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