Busi­ness Desk

The Gov­ern­ment's plan to deal with Cli­co de­pos­i­tors could cause some of this coun­try's cred­it unions to col­lapse, says man­ag­er of the Cred­it Union League, Di­anne Joseph. The Gov­ern­ment's pro­pos­al to make a $75,000 ini­tial pay­ment to Cli­co de­pos­i­tors and 20 bond coupons (one for each year) at ze­ro in­ter­est is caus­ing a great deal of con­cern among Cli­co de­pos­i­tors, in­clud­ing the cred­it unions. Joseph said that of the 128 cred­it unions in T&T, more than 40 have in­vest­ed about $600 mil­lion. And that's be­ing con­ser­v­a­tive, she said. She said the to­tal in­vest­ment of cred­it unions would be high­er than $600 mil­lion.

One cred­it union, the Guardian un­der­stands, has more than $100 mil­lion in de­posits in the fi­nan­cial­ly trou­bled in­sur­ance com­pa­ny. Drawn to the high rates of in­ter­est that the Port-of-Spain in­sur­er of­fered be­fore it hit hard times in Jan­u­ary 2009, many of the coun­try's cred­it unions held size­able Cli­co de­posits on their books, ac­cord­ing to checks by the Guardian yes­ter­day. Rhand Cred­it Union, which was es­tab­lished 63 years ago as a civ­il ser­vice co-op­er­a­tive so­ci­ety, held Cli­co de­posits of $28.1 mil­lion in a port­fo­lio of $395 mil­lion as at the end of 2009. Ven­ture Cred­it Union, based on the Point Lisas In­dus­tri­al Es­tate, in­vest­ed $21 mil­lion in a Cli­co fixed de­posit as its De­cem­ber 31, 2008, an­nu­al re­port shows, while its port­fo­lio is $333.7 mil­lion. East­ern Cred­it Union, the na­tion's largest, held $17 mil­lion in Cli­co units, ac­cord­ing to its 2008 fi­nan­cial re­port, but this was less than one per cent of its as­sets, ac­cord­ing to an of­fi­cial of the cred­it union.

Teach­ers Cred­it Union in­vest­ed $16 mil­lion di­rect­ly with Cli­co and $8 mil­lion in­di­rect­ly through the Cen­tral Fi­nance Fa­cil­i­ty, which is a co-op­er­a­tive of the na­tion's co-op­er­a­tives. The Teach­ers as­set base amounts to $503 mil­lion. Sev­er­al cred­it unions called by the Guardian yes­ter­day de­clined to pro­vide in­for­ma­tion on their Cli­co hold­ings.

"This must be a very wor­ry­ing time for any cred­it union that did not have a pol­i­cy that re­strict­ed in­vest­ment in any one en­ti­ty to an agreed max­i­mum per­cent­age of their to­tal port­fo­lio," said Rawle Rochard­son, the pres­i­dent of Teach­ers' Cred­it Union. Sev­er­al of the cred­it union re­ports sur­veyed by the Guardian yes­ter­day con­tained the fol­low­ing lan­guage, re­lat­ing to the Cli­co prob­lems: "Based on as­sur­ances from the Min­istry of Fi­nance and the Cen­tral Bank, we ex­pect to re­cov­er the full prin­ci­pal amounts in­vest­ed in these com­pa­nies on the re­spec­tive ma­tu­ri­ty dates."

The Guardian un­der­stands that some of the coun­try's trade unions have al­so made in­vest­ments in­to Cli­co. Pres­i­dent of the Na­tion­al Union of Gov­ern­ment and Fed­er­at­ed Work­ers (NUGFW) trade union, James Lam­bert said the union has some in­vest­ments but did not quan­ti­fy it. Lam­bert ad­mit­ted he was an in­di­vid­ual in­vestor and was not hap­py with $75,000. "When you look at the age of most Cli­co in­vestors, 20 years is a long time to wait... $75,000 is no big set of mon­ey giv­en the cost of liv­ing in T&T," he said. The Guardian al­so learnt that when Ca­roni (1975) Ltd fold­ed in 2003, the Gov­ern­ment had in­vit­ed fi­nan­cial in­sti­tu­tions to talk to cane farm­ers on in­vest­ing their sep­a­ra­tion pack­ages. Cli­co was giv­en the nod be­cause it was the on­ly com­pa­ny guar­an­tee­ing the sug­ar work­ers their prin­ci­pal backed by the Statu­to­ry Fund.

Joseph said the cred­it union move­ment has both Cli­co and British Amer­i­can (BA) in­vest­ments. She said that in Jan­u­ary 2009, the Cen­tral Bank is­sued a let­ter guar­an­tee­ing de­pos­i­tors both their prin­ci­pal in­vest­ments and their in­ter­est rates. The Cen­tral Bank guar­an­tee came af­ter the PNM gov­ern­ment took over the com­pa­ny to pre­vent a col­lapse of the coun­try's fi­nan­cial sec­tor. Last week, Fi­nance Min­is­ter Win­ston Dook­er­an an­nounced his "cre­ative plan" dur­ing the bud­get pre­sen­ta­tion.

Af­ter his an­nounce­ment, Dook­er­an said he in­formed the Cen­tral Bank Gov­er­nor Ewart Williams that no more in­ter­est should be paid to de­pos­i­tors.

But Joseph said in­vest­ment was made in the Lawrence Duprey en­ter­pris­es, based on ap­proval giv­en by the reg­u­la­tors–the Cen­tral Bank. "We in­vest­ed in Cli­co and BA at spe­cif­ic in­ter­est rates...The rates are paid on a quar­ter­ly, se­mi-an­nu­al or an­nu­al ba­sis. Cred­it unions bud­gets would have in­clud­ed the in­ter­ests ex­pect­ed from their in­vest­ments," ex­plained Joseph. For ex­am­ple, a $5 mil­lion in­vest­ment would have yield­ed $500,000 in in­ter­est. Cred­it unions, she ex­plained, would have fac­tored this in­to their fi­nan­cial year plan­ning. "We are no longer get­ting in­ter­est or prin­ci­pal...We have grow­ing con­cerns," she added. She said this had the po­ten­tial for cred­it unions to "mash up," col­lapse or per­haps go in­to re­ceiver­ship.