Home' Trinidad and Tobago Guardian : June 18th 2015 Contents There is little doubt in the mind of most
thinking people that it is unfair, unethical
and unjust to pay monies to Clico's directors
and senior officers at the same time as other
non-assenting policyholders and before the
Colman Commission of Enquiry has report-
As noted last week, in this space, the common sense solution
would have been to pay those directors and senior officers
who owned Clico policies after all other creditors, including
the Government as the insurer's largest creditor, had been
paid in full.
This concept of ranking creditors was at the heart of this
column's objection to the original proposed Clico settlement,
which was reduced to a Cabinet Note and a Letter of Intent
between the Government and the CL Financial shareholders
back to July 2013.
It is very strange that neither Clico nor the Central Bank
thought that there was anything wrong with the June 3 state-
ment that said the insurance company, "by law, has to treat
with all classes of creditors as part of its resolution strategy."
In theory, that is probably an accurate statement of the law.
But, the issue is that in most corporate restructurings share-
holders and executives of the company in jeopardy are always
the last to recover value from the failed entity.
As a result of the public outcry over the payment of the
Clico directors, just two days following the June 3 statement,
the Central Bank terminated the appointments of the Clico
chairman, Gerry Yetming and the company's managing director,
The basis on which the Central Bank took this decision,
made public in a June 5 statement, was that the two "failed
to follow direct instructions issued by the Bank on March 26
2015 setting out the protocols for all disbursements to pol-
icyholders and creditors under the Clico Resolution Plan. These
instructions included obtaining approval from the Bank for
all payments prior to disbursement."
What is telling about this controversy is the fact that, accord-
ing to credible reports, the Central Bank acted to terminate
the appointments of Yetming and John without prior consul-
tation with the Minister of Finance, Larry Howai.
My reading of the Central Bank Act is that this failure to
consult with the Minister directly contravenes Section 44 F
(5) of the Act, which states: "In the performance of its functions
and in the exercise of its powers under Section 44 D, the Bank
shall comply with any general or special directions of the Min-
ister and shall act only after due consultation with the Min-
Did the Central Bank terminate the appointments after due
consultation with the Minister?
If the Central Bank did not consult with the Minister before
the terminations, is the Central Bank in breech of Section 44
F (5) of the Central Bank Act?
On the issue of general or special directions of the Minister,
on April 16, the following question was asked of Minister
Howai: "Are all of Clico's related parties entitled to receive
payment from the $950 million that the company will disburse
as the first payment to all statutory fund STIP holders who
did not accept the Government's offer?"
Mr Howai's response was: "Yes. All outstanding STIP holders
will be titled to a partial payment in the first tranche."
I responded to the minister's statement by noting: "If the
Government has decided to pay all related parties, it seems
to me that that represents a policy shift from the position
held by the previous administration."
Mr Howai's response: "I didn't say that we would pay. I
said that they are entitled to payment. We haven't changed
our policy position."
My response to the minister: "If you tell someone that they
are entitled to receive a payment from the Government, can
you explain how you are going to discriminate between those
who have a legitimate entitlement and those who don't?"
Mr Howai's final response on this subject: "The policy
position hasn't changed. The funds will be placed in a blocked
account pending the outcome of the various legal actions cur-
rently in various stages."
In this last response, the minister outlined what seems to
have been the Government's policy on the payment of Clico's
related parties: that the funds for them would be sequestered
pending the "completion of various legal actions."
Was this policy (which strikes me as being fair, just and
equitable) communicated to the Central Bank as a special or
general direction of the Minister?
If the policy was communicated to the Central Bank, can
it be argued that the institution is in breach of Section 44 F
(5)?And if it was not communicated to the Central Bank, can
the minister tell the nation why he took the time to explain
the Government's policy on whether and how related parties
would be paid to a journalist, but not to the Central Bank.
The other aspect of the Central Bank's governance of the
Clico resolution that needs is the length of time it has taken
for the Bank to hire an investment bank to solicit offers to
purchase Clico's traditional portfolio.
On May 19, 2014, the Central Bank responded to comments
made by the Minister of Finance on the issue of the Clico res-
olution in the previous day's Sunday BG. Mr Howai had said
in an interview that Clico's traditional portfolio would be sold.
In its response, which was signed by Governor Rambarran,
the Central Bank stated: "The Central Bank is in control of
CLICO, pursuant to Section 44D of the Central Bank Act Ch.
79:02 (the Act). This regulatory action started on February 13,
2009, in order to safeguard the interests of policyholders and
creditors and to prevent disruption, substantial damage or
impairment of our financial system.
"The Central Bank is the only entity empowered to restructure
the business or undertakings of CLICO, in accordance with
the provisions of the Act.
"As part of the resolution strategy for CLICO, the Central
Bank proposes to transfer CLICO's traditional insurance portfolio
for value to an acquiring insurance company that is well cap-
italized, has a proven track record and the capacity to honour
all obligations to policyholders.
"In order to achieve this objective, the Act requires the
Central Bank to have a market price for Clico's traditional
portfolio determined by an independent valuation company.
An independent actuarial firm has, therefore, been engaged
to value Clico's traditional business for this purpose and the
exercise is still in progress.
"Subsequently, the Central Bank will conduct the process
for the sale and transfer of Clico's traditional insurance portfolio
on a transparent, open market basis. The Bank has neither
engaged with any prospective buyers nor made any decision
on the structure of the portfolio transfer."
Subsequent to this statement, the Central Bank announced
on June 10, 2014 that Neil Dingwall had been hired as a con-
sultant to the Central Bank on the restructuring of Clico, with
an emphasis on organising the sale of the traditional portfo-
lio.More than a year after Mr Dingwall was hired as a consultant,
can Mr Rambarran explain why an investment advisor has
not as yet been appointed to lead the sale of Clico's traditional
portfolio, which comprises its life, group heal and pension
It was Mr Rambarran who, in his address on June 1 at the
fourth Monetary Policy Forum, disclosed that the Central Bank
would "soon appoint an investment advisor to lead the portfolio
Can the Central Bank also explain whether the dismissal
of the chairman and the managing director of Clico will speed
up or slow down the appointment of the investment advi-
And what impact would the dismissals have on the value
of the portfolio if enough people lose confidence in the Bank's
handling of this issue?
JUNE 2015 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor--business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
Telephone: 225-4465, ext 2035, 2025
Fax: (868) 225-3147 (Editorial)
Fax: (868) 623-2050 (Advertising)
4--10 Rodney Road,
PO Box 122.
Decoding the Clico resolution
Jwala Rambarran, Governor of the Central Bank
Neil Dingwall, consultant to the Central Bank
Links Archive June 17th 2015 June 19th 2015 Navigation Previous Page Next Page