fp Turks and Caicos

The Turks and Caicos Islands’ first indigenous bank was provisionally forced to cease operation Friday after being under scrutiny for more than two years by the independent Financial Services Commission.

“We have been working with the bank on solutions for over two years,” FSC Managing Director Kevin Higgins said in an interview Saturday with the fp.

The FSC has a responsibility for monitoring the performance of all financial institutions in the country. The commission reviews quarterly statements by each financial institution to identify weaknesses. Once a weakness is observed, the commission follows strict guidelines under international standards for corrective action.

The process has several steps. Depending on the effectiveness of the actions taken, the FSC will increasingly involve itself to help an ailing bank. He says the FSC began down this path with TCI Bank more than 24 months ago, culminating with the extreme decision to seek a court-ordered closure.

“All indigenous banks that start out have teething problems,” Higgins explained. “They have no parent bank who provides support for their institution.”

One of the challenges of an indigenous bank — especially in a country with no central bank — is that there is no one to call on to help financially in a rough patch, Higgins said.

The slope began to steepen when the bank announced the closure of two of its four branches in February and March. Shortly after that, several local “important depositors” began withdrawing their funds, Higgins said. Those depositors each had $500,000 or more in deposits in the bank.

His Excellency the Gov. Gordon Wetherell told the fp that he was informed that there were emerging signs that the bank’s health was at risk, but negotiations continued with potential investors to save the ailing institution.

Higgins and Wetherell both confirmed there were discussions going on with potential investors, including a banking group that was interested in taking a stake in the bank, right up until Friday afternoon when the court order was announced. He said those discussions had been going on for some time, and would continue through the provisional liquidation. However, he stated that it was the responsibility of the commission to take the aggressive action in order to prevent a run on the bank, risking further depositor funds.

Higgins said that was the reason the bank was not informed of his decision to pursue the court order for the appointment of a provisional liquidator. The governor was informed before the order was pursued, but because the FSC is an independent body, he had no part in the decision.

The provisional liquidator is just what its name suggests — a provision to access the bank assets and give it time to find alternatives for funding. The court has given the provisional liquidators, partners of Deloitte & Touche, until June to put forth a plan with recommendations to the court. Then the court will decide how the bank will proceed.

Higgins says the mechanics of any potential deal will be the deciding factors as to how much, if any, depositors may receive of their frozen assets.

“Banks are business, and like any business, they are looking for bargains,” he said. Where a bailout before the court order could have potentially saved all the depositors funds, during a provisional liquidation investors will be looking to obtain a deal which could cost a portion of depositors funds, he explained.

“Normally the bank would be purchased, and the new bank would agree to take on existing conditions,” he said. However, every negotiation is unique, and only time will tell what the actual outcome may be.

Although he could not give specific information on current depositors, Higgins confirmed that the Eastern Caribbean bank group continues to be shareholders in the bank. They were reported to have a 30 percent share when the bank opened in 2005.

Another shareholder of the bank was confirmed to be the TCI National Insurance Board. Higgins says while their funds are also frozen at the moment, their investment portfolio is well balanced and diversified, which should minimize any negative affect a potential loss could have on the funds.

Higgins said the NIB investment portfolio is designed to withstand shocks in the markets. “It is very professionally designed, its assets well allocated and very well managed,” he said.

While negotiations continue to be underway to save the ailing bank, the governor said he will be fast tracking the process to put legislation in place that will protect future depositors in the country. He said negotiations had been underway since last year between the FSC and local banks to institute a depositors protection insurance.

Wetherell said that it is best practice today to have such deposit insurances in place, but in that respect “the TCI is lagging behind.” The governor believes such a policy would offer a degree of comfort in local banks as well as a greater degree of confidence for investors or shareholders in local financial institutions. The insurance, which would be paid for by the banks, would provide protection for deposits of TCI resident account holders up to a limit which is pre-defined.

Both the governor and Higgins said although unfortunate, this situation was a sign of the maturity of financial services in the TCI. “We have the regulatory framework which has proven it can deal with these sort of challenges,” Higgins said.

For the moment, it is a waiting game. The provisional liquidators are expected to come out with a statement Monday morning, April 12, on how both creditors and depositors are to proceed. Higgins suggests that account holders should open an account with a new institution. Additionally, customers should get all their TCIB documentation together to show their current balances.

He suggested that some businesses may have access to credit at other institutions based on their business history until they again regain access to their funds at TCIB.

He says account holders will have to be patient because it is going to take some time before TCIB funds are available.

Customers and shareholders affected by the closure can contact the liquidators at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 649-941-7500. For more information, visit the Web site www.tcibpliquidation.com.