Last week­end’s col­lapse of two banks in the US set off a train of events that should be fol­lowed care­ful­ly around the world, but es­pe­cial­ly in the Caribbean.

The rea­sons for the fail­ure of Cal­i­for­nia’s Sil­i­con Val­ley Bank (SVB) and New York’s Sig­na­ture Bank are not as im­por­tant, at this point, as the speed with which US reg­u­la­tors act­ed and the rea­son for the speed.

It was an­nounced that Sil­i­con Val­ley Bank was in trou­ble last week and by Sun­day US Trea­sury Sec­re­tary Janet Yellen, Fed Chair Jerome Pow­ell and FDIC chair­man Mar­tin J Gru­en­berg were in a po­si­tion to out­line mea­sures that mit­i­gat­ed the pos­si­ble fall­out from the fail­ure of the banks.

The most im­por­tant an­nounce­ment on Sun­day was all the de­posits at both the failed banks would be deemed to be in­sured, even though the le­gal lim­it of de­posit in­sur­ance in the US is US$250,000.

And the US Pres­i­dent Joe Biden made an ad­dress from the White House on Mon­day, to re­it­er­ate that the US Gov­ern­ment would stand be­hind the de­pos­i­tors of the failed banks, what­ev­er it took.

The ac­tion by the top reg­u­la­tors and politi­cians in the US was meant to stop the run by de­pos­i­tors of SVB on the bank. In the US, they un­der­stand that trou­ble in a rel­a­tive­ly small bank can quick­ly mush­room in­to de­ci­sion-mak­ing that threat­ens the fi­nan­cial health of the en­tire fi­nan­cial sys­tem.

There is an un­der­stand­ing that even the 16th largest bank in the US, as SVB was re­port­ed to be, can­not be al­lowed to dis­rupt the con­fi­dence of de­pos­i­tors that they will al­ways have ac­cess to their mon­ey.

All de­pos­i­tors must be able to go to sleep at night know­ing that they will have ac­cess to life sav­ings when they wake up in the morn­ing.

That con­fi­dence must not be tri­fled with by a long-time news­pa­per colum­nist who can flip­pant­ly de­scribe lo­cal com­mer­cial banks as “big pres­sure,” in mak­ing the point that “the pres­sure points are so many and so cru­el, es­pe­cial­ly for old­er cit­i­zens, that some banks are at risk of re­plac­ing lawyers as the top hate-fig­ure.”

This colum­nist wrote that his read­ers would be dis­ap­point­ed if he did not join their com­plaints about the fees for on­line trans­ac­tions and for pa­per state­ments.

Fees for on­line trans­ac­tions and for pa­per state­ment are, of course, a sore top­ic among mem­bers of our com­plain­ing class, who have be­come em­bold­ened by their easy ac­cess to so­cial me­dia plat­forms to vent against lo­cal banks.

In my view, any cus­tomer who is up­set by a fee charged by a lo­cal com­mer­cial bank is free to take their busi­ness to a com­pet­ing bank.

Al­so, it is clear that the Cen­tral Bank, which reg­u­lates T&T’s fi­nan­cial in­sti­tu­tions, has im­posed much more stren­u­ous re­port­ing re­quire­ments by lo­cal com­mer­cial banks. Such com­pli­ance re­quire­ments mean more staff, more au­di­tors and more costs in com­pil­ing and sub­mit­ting re­ports to the reg­u­la­tor.

Are the fi­nan­cial in­sti­tu­tions un­jus­ti­fied in pass­ing on those com­pli­ance costs to their cus­tomers?

Here in T&T, the Cen­tral Bank’s In­spec­tor of Fi­nan­cial In­sti­tu­tions (IFI), Patrick Solomon, and his team, have been hard at work, in the back­ground, seek­ing to en­sure that T&T’s com­mer­cial banks, non-bank fi­nan­cial in­sti­tu­tions and in­sur­ance com­pa­nies are in good fi­nan­cial health.

In the last three years or so, much of the work of the IFI, and his team, has been fo­cused on en­sur­ing that T&T’s fi­nan­cial in­sti­tu­tions “have in­sti­tut­ed ro­bust risk man­age­ment prac­tices to iden­ti­fy and man­age all ma­te­r­i­al risk ex­po­sures, in­clud­ing en­sur­ing that ad­e­quate cap­i­tal is avail­able to sup­port iden­ti­fied risks.”

That quote is from a cir­cu­lar let­ter is­sued by Mr Solomon to all fi­nan­cial in­sti­tu­tions on De­cem­ber 22, 2022. In the cir­cu­lar let­ter, Mr Solomon not­ed that the Cen­tral Bank had im­ple­ment­ed Pil­lar 2 In­ter­nal Cap­i­tal Ad­e­qua­cy As­sess­ment Process (ICAAP) of the Basel II/III frame­work.

The fi­nan­cial in­sti­tu­tions were re­mind­ed that the Cen­tral Bank is­sued the ICAAP Guide­line in No­vem­ber 2020 to guide this process and pro­vide the in­dus­try with the min­i­mum ex­pec­ta­tions for the ICAAP sub­mis­sions.

The pur­pose of the let­ter was to in­form the fi­nan­cial sec­tor, “based on re­view of the ICAAPs to date as well as feed­back from the li­censees and fi­nan­cial hold­ing com­pa­nies,” that the Cen­tral Bank was ex­tend­ing the time­line for sub­mis­sion of the ICAAPs from four to six months af­ter the end of the fi­nan­cial year of the reg­u­lat­ed fi­nan­cial in­sti­tu­tions.

On No­vem­ber 18, 2022, Mr Solomon told the fi­nan­cial sec­tor that the Cen­tral Bank had de­vel­oped a draft Liq­uid­i­ty Cov­er­age Ra­tio Con­sul­ta­tion Pa­per and re­port­ing tem­plate (al­so re­lat­ing to Basel II/III)

In that cir­cu­lar let­ter, the IFI not­ed: “As you are aware, the liq­uid­i­ty mon­i­tor­ing mea­sures cur­rent­ly in place are in­ad­e­quate for the mon­i­tor­ing of bank­ing in­sti­tu­tion’s liq­uid­i­ty by the Cen­tral Bank.” The mes­sage there was in­sti­tu­tions li­censed pur­suant to the Fi­nan­cial In­sti­tu­tions Act, 2008 and their fi­nan­cial hold­ing com­pa­nies (FHCs) “will be re­quired to main­tain a min­i­mum LCR of 100 per cent.”

On Au­gust 4, 2022, the IFI dis­patched a cir­cu­lar let­ter ad­vis­ing that the Cen­tral Bank was seek­ing to en­hance its mon­i­tor­ing of li­censees by re­quest­ing the sub­mis­sion of in­for­ma­tion on li­censees’ top 20 bor­row­ers and de­pos­i­tors on a quar­ter­ly ba­sis.

Hap­py to be back home

When I re­signed from One Caribbean Me­dia last month, I was asked by a very as­tute ex­ec­u­tive there whether I was go­ing home.

The idea that Guardian Me­dia Ltd would be con­sid­ered my “home” had nev­er oc­curred to me. But, of course, it is.

May I sin­cere­ly thank all those who have wel­comed me back to GML. I do look for­ward to con­tin­u­ing my con­tri­bu­tion.