(Trinidad Express) – CL Financial’s crisis will force Government to borrow more this year to sustain its rescue of the cash-strapped conglomerate.
Central Bank Governor Ewart Williams said on Wednesday that plunging crude oil prices had already forced the State to curb its expenditure and could lead to increased borrowing this year.
“The CL Financial crisis will add to that borrowing,” he told businessmen and investors while delivering an address at the opening of the “The Financial & Economic Forum 2009”, hosted by the British-Caribbean Chamber of Commerce at the Hilton Trinidad in St Ann’s.
Williams said the Clico and Clico Investment Bank crisis was a systemic failure and “clearly we need to update the legislation”. He also noted, however, that the Central Bank recognised that Clico was extremely profitable for many years, but had major vulnerabilities because of inter-party related transactions between Clico and CL Financial and its other subsidiaries.
He said the Central Bank attempted to put restrictions on Clico using money for inter-party transactions from its statutory reserve fund, but the company exploited loopholes, took risks with depositors’ funds and bent the rules for years.
Clico also resisted attempts by the Central Bank to have the country’s largest insurance company run more safely and after consultation, and the Bank recognised that it could have ended up in a very long legal battle with Clico, Williams said.
He said the Clico/CIB crisis was a major one for the region, but the Government and the Central Bank had “contained the spillover” for now.
As the government and the Central Bank continue work to evaluate certain CL Financial assets to ultimately divest them, Williams said the money earned from the sale of these assets would come back to the country, and this would ensure that the “burden on the taxpayer will be as small as possible”.
He also dismissed rumours of an impending devaluation of the TT dollar, saying the country was in a fortunate position with reserves of US$9 billion. “The rumours of an impending devaluation are certainly misguided,” he said.