KINGSTOWN, St. Vincent, Feb. 6, IWN – Opposition Leader Arnhim Eustace on Tuesday said he does not like the idea of regulators managing the Building and Loan Association, but again urged against a run on the financial institution.
“I’ll be very frank with you, I don’t like the idea because I think this has to do with the whole issue of confidence and so on and how you deal with things. But, runs on an institution like this can often result in the institution folding up completely and many people losing everything there,” Eustace said on “Current Affairs” on Nice Radio.
“I am always cautious. Some people might say I am wrong, but I am always cautious about those things. And if they are handled properly you are not likely to have any significant run; and any problems they have in the institution, they are likely to correct them.”
The involvement of the Financial Services Authority (FSA) in the 72-year-old building society should give depositors more confidence, but this will depend on the FSA’s approach, Eustace said.
The FSA — the government agency that regulates non-commercial bank financial institution — on Friday announced that it had assumed management and control of Building and Loan.
The FSA’s intervention — in keeping with the law — came two weeks after a letter in The Vincentian newspaper by Luke Browne.
Browne, an economist involved in pension reform at the Ministry of Finance, expressed concerns about the management and financial health of Building and Loan.
He accused directors of the company of untoward actions and asked if Building and Loan was on the verge of collapse.
Reports say that millions of dollars were withdrawn from Building and Loan after Browne’s letter and reports by newspapers on the development.
I-Witness News understands that Building and Loan had offered depositors the option of forfeiting three months’ interest for immediate withdrawals of their investments.
Reports say that since the involvement of the FSA, Building and Loan has invoked a provision that requires depositors to give three months’ notice before they can withdraw their investments.
Meanwhile, Prime Minister Dr Ralph Gonsalves on Monday invested EC$21,000 (approximately) in Building and Loan on behalf of one of his daughters and encouraged Vincentians to also invest.
“I have absolute confidence that the FSA will function properly. They have the personnel themselves and they have other people they can bring to the table, including the consultants and the government — this government — will provide all the necessary support for the maintenance of the strength of that institution, which is vital to the financial system of this country,” Gonsalves, who is also Minister of Finance, told a press conference.
Eustace, a former prime minister and minister of finance, speaking separately on radio on Monday, said some Vincentians, bitten by the collapse of British American and CLICO are shy about investing in the financial sector.
“But, I maintain that I want to see the institution (Building and Loan) survive and prosper. And anything we can do to ensure that happens, I will tend to support that,” Eustace said.
The FSA on Wednesday said its involvement in Building and Loan “is not a permanent arrangement”.
It appealed for “calm and reasoned judgment on the part of all relevant parties at this time”.
“… reacting in panic to withdraw monies and close accounts is NOT helping the institution,” the FSA said.
Eustace said on Tuesday that the FSA’s involvement should give depositors confidence.
“I am not a person who recommends runs on institution. But I recognise the right of persons, within the present environment in St. Vincent, to take that decision if they want to do so. But I am not going to recommend that. I believe it is possible to pull back the institution…” Eustace said.