CL Financial bailout in limbo

Unless the Bills are passed, the bailout plan cannot go ahead. The legislation is needed to provide the required oversight for insurance companies and will give regulators the authority to go ahead with the CLICO takeover. (File photo)

PORT OF SPAIN, Trinidad, February 4, 2009 – The rescue plan which the Trinidad and Tobago government has for the CL Financial Group is on pause, for now, with the Patrick Manning administration unable to get the parliamentary support for legislation needed for the bailout.

When the Central Bank (Amendment) Bill and the Insurance (Amendment) Bill were debated in the House of Representatives on Monday, backbencher Dr Keith Rowley and members of the Opposition were unable to reach agreement with other government MPs.

In order to be passed, the Bills require a three-fifths majority which, in this case, is 26 – the number of seats which the ruling People’s National Movement (PNM) holds. But with one of those MPs, Rowley, refusing to give his support and the Opposition asking for more time to study the legislation, the government could not get enough backing.

A Memorandum of Understanding (MOU) was signed last Friday for government to provide funding for CL Financial, one of the region's largest conglomerates, in exchange for collateral and an equity interest in one of its companies, CLICO. The Central Bank will take control of CLICO Investment Bank (CIB).

However, unless the Bills are passed, the bailout plan cannot go ahead. The legislation is needed to provide the required oversight for insurance companies and will give regulators the authority to go ahead with the CLICO takeover.

“The government does not wish to bully the Opposition, the government does not wish to railroad the Opposition and we have listened— painful as it has been—and therefore, Mr Speaker, in order to give the Opposition the time, some more time that they have asked for, to go through the amendments, the tables that we have given them, I beg to beg that this House be now adjourned,” said Leader of Government Business, Works and Transport Minister Colm Imbert after Monday’s 13-hour session yielded no results.

The parliament discussion resumes this morning following Monday’s adjournment, as government seeks to convince opponents that the steps being taken are vital.

Rowley has said he will not support any Bill which puts billions more dollars in the hands of Calder Hart, Chairman of the National Insurance Board (NIB) which will take control of 55 per cent of the shares in Republic Bank Limited on behalf of the government. He has recommended that there be a holding company instead.

The Opposition has also attached conditions to their support of the legislation. They say they want similar aid for the Hindu Credit Union; they have called for the assets of the CLICO businesses taken over by the Manning government to be placed in a special purpose company established for the sole purpose of holding these assets in trust; and for the directors of that company approved by Parliament, among other demands.

Meantime, The Central Bank of Barbados has committed financial support to CLICO Mortgage and Finance Corporation (CMFC), one of the companies in the CL Financial Group.

In a release issued on Monday, the Central Bank said that it would deposit up to BDS$10 million (US$5 million) with CMFC and open a facility in the event that the company needs access liquidity.

“The Bank, with the endorsement of the Ministry of Finance, also proposes to provide interbank guarantees, which cover lending by other banks to CMFC, if necessary,” it said.

At the same time, the Central Bank has emphasised that CLICO Holdings Barbados Limited “is a well-run company and that the domestic financial system is well regulated and capitalised”.