Former governor testifies to standoff with CLICO
PORT OF SPAIN — In its regulation of failed billion-dollar insurance company CLICO, the Central Bank faced a double-edged sword — archaic legislation limited its legal teeth and attempts at moral suasion on issues like corporate governance fell flat.
“They never gave in. CLICO never gave in. You had to fight for even the smallest victory,” said former Central Bank governor Ewart Williams as he took the witness stand during the tenth evidential hearing of the enquiry into the collapse of CLICO and the Hindu Credit Union at the Winsure Building, Richmond Street, Port of Spain, yesterday.
Williams was the governor of the Central Bank for ten years, and it was under his tenure that the regulation of insurance companies was brought under the bank.
As he told of what amounted to a tug-of-war battle between the insurance company and its regulator, Williams observed that CLICO executives were at times “uncooperative” and “offensive” to the Central Bank under his tenure, and the Bank was cowed often enough as it had limited legal recourse.
To this end, the bank relied heavily on moral suasion after it assumed regulation of insurance companies in 2004.
“The tools available to the Central Bank were blunt instruments: there was limited scope for targeting particular behaviour, as opposed (for example) to taking control over the entire institution or revoking an institution’s licence. Depending on the circumstances (including the institution concerned and the offending behaviour), intervention carried a serious risk of undermining public confidence and triggering a run on the institution concerned,” stated Williams in his 43-page witness statement to the commission.
“I was conscious of the particular difficulty of regulating businesses with a high profile and a weighty impact on the national economy,” he stated.
On this position, he was challenged by counsel for the Ministry of Finance Vincent Nelson QC, the first party to cross-examine, on whether he relied too much on moral suasion in reining in CLICO.
Williams conceded that while “governance is not an area which lends itself to rules and regulations”, the Central Bank had received a commitment from CLICO to set up an audit and investment committee, which they expected to be implemented. (Express)