Home' Trinidad and Tobago Guardian : April 19th 2015 Contents APRIL 19 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
Last week, I heard from a credible
source---which is to say one not
given to passing on false or mis-
leading information---that a retired
bank executive had gone to his
commercial bank branch last week
and been denied access to the
funds in his US dollar savings account.
Now, according to the 2008 Financial
Institutions Act (FIA), a bank is any institution
which carries on the business of banking and
business of a financial nature.
On the definition of the business of banking,
Section 16 (2) of the Act states: "The business
of banking means the business of soliciting
and receiving sums of money from the public
on current or deposit account which may be
withdrawn on demand, by cheque, draft, order
The important concepts in those definitions
are that the institution can accept deposits
from customers and that those deposits may
be withdrawn from the bank in a number of
ways, including on demand. Although it is
not defined in the Act, one assumes that on
demand means that if I have $20,000 in my
chequing account and I tell my bank branch
that I want all $20,000 in cash, that I will get
it. It seems to me that there is an explicit
agreement that has governed banking for hun-
dreds of years: Funds are placed in banks for
safekeeping, in the knowledge that the depos-
itor can recover those funds as or when they
This is a legal obligation that goes to the
heart of the very purpose of banking.
If someone places US$20,000 on deposit
at a local commercial bank, the same rules
that apply to TT-dollar accounts, should apply
to US-dollar accounts.
Why are banks being allowed to take in US-
dollar deposits and are not mandated to pay
out those deposits on demand?
This is not the first time that I have heard
indirect reports of people having difficulty
recovering the money in their foreign accounts.
Back in August 2014, the Central Bank was
asked whether it was legal for a commercial
bank to restrict access to cash from a US dollar
The answer on August 21, from the Central
Bank s spokesperson, Charlene Ramdhanie,
was as follows: "No authorised dealer can
restrict client access to funds, unless special
legal circumstances warrant such a restric-
"However, there are specific operational
reasons why the volume of US-dollar cash
requested might be unavailable at times and
do not fall under the purview of the Central
These operational reasons include the fol-
• Amount of physical cash is not available
at the particular branch at the point in time;
• Authorised dealers have daily branch lim-
its that limit the volume of US dollar cash
that can be sold by a branch on any given day;
• Authorised dealers may have customer
limits that limit the volume of US dollar cash
that can be sold to any client per day;
• Authorised dealers usually explain to their
clients why the full amount of requested US
dollar funds might be unavailable at the point
in time, and usually indicate a reasonable time-
frame when clients can expect to receive the
rest of their US dollar funds."
Now, it seems to me that the Central Bank
is acknowledging that a bank, in the normal
course of its business, cannot legally restrict
a client s access to the funds in their foreign-
If that statement is true, then the Central
Bank s response that there are "specific oper-
ational reasons why the volume of US-dollar
cash requested might be unavailable at times"
makes absolutely no sense.
If commercial banks are legally obliged to
provide unrestricted access to their deposits
of whatever currency by customers, there
CANNOT possibly be an operational reason
why a request for US$20,000 in cash would
not be honoured on demand.
In other words, if an action (restricting
access to a deposit account) is not legally per-
missible, it cannot be operationally permissible
that the access to the funds is restricted?
It is either banks arrange themselves so that
they can honour requests for withdrawals from
US accounts on demand, or they stop offering
non-TT currency accounts.
It would be illegal and immoral for banks
in this country to honour requests for the pay-
ment of bills by importers ahead of the requests
by the man-in-the-street with a US dollar
account for funds to take his family on vacation.
The Central Bank also makes the point that
these "specific operational reasons" why the
volume of US-dollar cash requested might be
unavailable at times "do not fall under the
purview of the Central Bank."
The interpretation by the Central Bank that
it is not responsible for commercial banks fail-
ing to honour their legal obligations to pay
deposits on demand is surely based on a flawed
reading of the FIA.
This is because the FIA states that the pri-
mary objective of the Central Bank, in respect
of licensees, "shall be to maintain confidence
in, and promote the soundness and stability
of, the financial systems in Trinidad and Toba-
go."It would seem obvious, even trite, that part
of maintaining confidence in, and promoting
the soundness and stability of, T&T s financial
system would be to ensure that there are oper-
ational guidelines that mandate access to
deposit accounts on demand, regardless of
In other words, a fundamental aspect of
maintaining confidence in the financial system
must be that customers of a regulated insti-
tution MUST have access to their funds, as
and when they want it. If there are no such
guidelines, or the adherence to those guidelines
is not being strictly enforced, then surely con-
fidence in the soundness and stability of the
financial system will at risk.
In citing operational reasons why access to
a US dollar deposit account may be limited
by a financial institution regulated by the Cen-
tral Bank, is that institution being faithful to
The other objectives of the Central Bank,
in regard to licensees under the FIA, include
supervising them "to determine whether they
are in sound financial condition and main-
taining an appropriate level of protection for
depositors of licensees."
If a commercial bank is not in a position
to honour a normal request for funds in a for-
eign currency account, can that commercial
bank be said to be in a sound financial con-
If the Central Bank is mandated to ensure
that banks that it supervises "maintain an
appropriate level of protection for depositors,"
how can it be acceptable for a commercial
bank not to honour on demand a withdrawal
from a US dollar account?
Isn t part of the Central Bank s responsibility
to ensure that all demands for monies in all
deposit accounts in this country are satisfied,
whatever the currency?
To be absolutely fair, the FIA defines a
deposit as being a "sum of money paid to a
person, whether or not evidenced by any entry
in a record of the person receiving the sum
of money, on terms under which the sum of
money will be repaid or transferred to another
account, with or without interest or a premium,
either on demand or at a time or in circum-
stances agreed to by or on behalf of the depos-
itor and that person."
To me, this simply refers to the practical
issues surrounding the counting of a large sum
of money, not its availability.
Is it illegal to restrict
access to US$ accounts?
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