Parliament approves new Banking Bill amidst major concerns

Political Leader of the National Democratic Congress (NDC), Senator Nazim Burke has said he does not agree with the passing of legislation in Parliament and making changes later, even though the House agrees that there is a fault when the bill is deliberated upon.

“I do not believe that as a general rule it is good practice to say let’s pass the law and then change it…I believe that if problems or defects are determined or are discovered in legislation before it is passed by the House, it is the responsibility of the lawmakers to hold and say let’s change it because we recognize it’s a problem before it even gets on the law books”, he said.

Burke made the remarks as part of his contributions in the Senate to deliberations on the Banking Bill, which was passed without amendment during the last sitting of the Upper House on April 29.

He branded this posture by government as “a very lazy attitude to legislation and to law making”.

The Keith Mitchell-led government has reportedly recruited former House Speaker, Dr. Lawrence Joseph to help in drafting legislation to be taken to Parliament.

High level sources told this newspaper that the two year old administration is not happy with the quality of the legislation prepared for Parliament by the Office of the Attorney-General.

The controversial Banking Bill that was agreed upon by the eight member state of the OECS currency union to create one economic space and seeks to remove the powers from the Ministers of Finance in the individual states and placing it in the hands of the Eastern Caribbean Central Bank (ECCB).

Sen. Burke said that while in principle, he supports the Bill and believes that “it can serve to strengthen the resilience of the financial system in the Currency Union”, he expressed the view that “a happier medium could have been found in determining the role that the Ministers of Finance could and should play in the granting of licenses.”

Under the Bill, a financial institution has to make an application for a license to the Central Bank, which would then inform the Ministers of Finance that an application has been made and and to take whatever decision is deemed necessary.

According to Sen. Burke,  the Ministers of Finance should at least be afforded the chance to make submissions as to why they support or do not support the application put before the ECCB.

“While we understand the benefit of having that regulatory control by the Central Bank…I do believe that there could have been some opportunity for the Minister of Finance to be allowed to make submissions to the ECCB once an application is made…not that the government would get to decide but its input may be relevant”, he said.

Sen.  Burke affirmed his belief that “it is not enough to simply say that the Ministers of Finance by virtue of being members of the Monetary Council would have some say in what is going on”.

He asserted that “the criteria that the Bank will use to determine whether to approve or not approve a license is not the criteria that will be considered by the Monetary Council when it sits,” and that “the Monetary Council would not be sitting as a screening committee deciding to approve any particular application.”

He said while the “criteria set out in the law is predictable and certain” the fact remains that  “the peculiarities that may exist in a particular country, the relationship or the history that might exist between a particular financial institution and a singular government may be relevant considerations that a government may wish to submit in assisting the Central Bank in making the right decision.”

Private Sector Representative in the Senate,  Christopher De Allie said he supports the idea of the Bill but expressed the view that it is “over-reaching in some circumstances,” and also pointed out that the additional cost to financial institutions that must also be addressed.

“I think the ECCB is adding again another issue in terms of cost for the financial institutions in order to meet the requirements under the Act…the cost of compliance, securities, dealing with systems on the virtual realm and IT (Information Technology) that are coming, but a major part of the cost structure has to deal with compliance”, he told the Senate.

The “appointment of external auditors every six years “is one of the issues which Sen. De Allie felt would result in additional costs for financial institutions.

He noted that “it takes time for an external auditor to learn the environment of a new bank,” and also pointed out that “in our country even within the Union the scope of external auditors to choose from is limited so you would have thought that probably instead of reducing the time from (9-10 years), they would have kept the original time and look for another mechanism, probably rotate partners that do the audits for these banks to save them time on the issue of having to look for a new auditor.”

“And then we have the complication of the standardisation of how we do these things,” De Allie advanced, noting that there are banks in the region and in Grenada that are part of a larger group of banks…”.

“…When you are asking a separate entity in a separate country where that bank is located different from another country to change that process and have a different auditor from the one for the group, it makes it difficult and complex…so it poses another burden and cost to the institution”, he added.

The “extra reporting required under the Act” is something that should not be overlooked, Sen. De Allie said, adding that “financial institutions are already burdened with a number of issues” in this regard.

“The ECCB through this Bill is now going to require further reporting, deeper reporting and that is going to take away from the time of the officers in the banks to meet officers in the banks to meet these requirements and increase the cost”, he said.

“We have complained in this region from an ECCB level that we need to reduce the transaction cost for these institutions for our customers but here we are adding another layer that is going to possibly increase the cost to the consumer because the transaction cost is obviously going to go up”, he added.

The private sector representative also questioned the implications of the “expanded definition of a bank officer” as it relates to “indemnity” and “insolvency” for the workers.

Labour Representative Sen. Raymond Roberts commended the bill but took issue with government for a lack of consultation on the legislation and its implications claiming that the “workers movement and civil society have been denied the right to properly scrutinize the bill”.

“It seems to us that the architect of this bill or perhaps th state has chosen an elite group to treat with that bill. I have spoken to workers, middle management in the banks, clerks, other persons in financial institutions and they don’t have a sense of what is written in this bill…”, he said.

“…Here in Grenada we have recorded a long list of blunders -Capbank is a perfect example,” he said recalling that “our government gave a license to CapBank and we all know the consequences…and the Treasury ended up paying the cost.”

“We need to involve the wider society. The little man in Grenada Carriacou and Petite Martinique could have contributed to governance in this bill. And we ought not to ignore that”, added Sen. Roberts.

The Trade Union representative went on to say that the little people of this country and the wider Organization of Eastern Caribbean States (OECS) are being “treated with scant courtesy” and as such too the decision to abstain from voting on the bill.

According to Sen. Roberts, the workers movement cannot “just blindly support” the bill.

In response to Sen. Roberts’ comment, Leader of Government Business in the Senate Sen. Simon Stiell said consultations were held among the banks and acknowledged that much greater communication could have been held.

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