EDITORIAL – There must be transparency
THE?NEAR COLLAPSE of the world financial system in late 2008 and the global credit crisis that followed gave rise to widespread calls for changes in the regulatory system. It was obvious that tighter regulation was needed for both banks and non-banking financial institutions.
Barbados responded by establishing the Financial Services Commission (FSC) in April 2011 to lift Barbados’ regulatory and financial sectors to a higher plateau.
The FSC is now responsible for regulatory functions that were previously undertaken by the Securities Commission under the Securities Act – regulatory functions that were previously undertaken by the Office of the Supervisor of Insurance and Pensions under the Insurance Act and the Exempt Insurance Act. It is also in charge of pensions under the Occupational Pensions and Benefit Act and of regulation of credit unions.
Regulatory tasks have become extremely important and complex. Former Governor of the Central of Barbados, Winston Cox, noted that the failure of CLICO had forced national regulators of the different financial institutions to work together to develop models for preventing the spread of the contagion from one financial service to another, even though he felt there was a need to go further.
This is why an article featuring statements from managing director and chief executive officer of the Barbados National Bank (BNB), Derwin Howell, in the latest issue of the Barbados Business Authority makes for interesting reading.
In that article, Howell makes the bold comment that former head of the National Insurance Scheme (NIS), Ian Carrington, does not have to resign from the board of the BNB, now that he heads the newly created FSC. His argument is that there is no conflict of interest and therefore Carrington should remain as a director.
“The matter has engaged the attention of the board of the BNB,” Howell wrote. “Our understanding is that the FSC has no jurisdiction over banks. They regulate non-bank deposit-taking financial institutions. It is something that we raised. We looked at it, and Ian himself came to us on the matter. We did our research and got our advice on it and there was no conflict there – so he stays. He is a representative of the NIS.”
Well, well! This position raises a number of questions. Is the BNB Finance & Trust Corporation the investment manager of BNB Mutual Funds?
Is the BNB Finance & Trust Corporation a wholly owned subsidiary of BNB Inc.? Isn’t the FSC responsible for regulating mutual funds?
While Carrington does not serve as a director of the BNB Finance & Trust Corporation, wouldn’t he as a regulator have to talk to the other financial regulator, the Central Bank of Barbados? And wouldn’t there be a need for some collaboration between the regulators?
It is not enough that the regulator be empowered, but the regulator must also instil confidence in the quality of regulation as the public must have no lingering doubts that their interests are well safeguarded.
Though we have no doubt BNB Inc. did its due diligence nor any doubt that Carrington is a man of the highest integrity and adheres to best practices in corporate governance, we believe there must be no ambiguity in this situation as the FSC needs to start on the right foot.
There must be a clear separation of powers. Carrington has little choice but to resign from the BNB board.