Prior to the invention of our EC dollar in 1965, and since 1935, the name of our currency was the “BWI dollar”. Then, our islands entered into the Eastern Caribbean Currency Agreement. This established the Eastern Caribbean Currency Authority (ECCA), with headquarters in Barbados. ECCA was authorised to issue the new EC dollar. Barbados withdrew from the Currency Union in 1972. Our governments decided to move ECCA’s headquarters to St Kitts. Gradually, most of our countries became independent. The name BWI dollar seemed obsolete. The name was changed to the “EC dollar”.
In 1981, the Organisation of Eastern Caribbean States (the OECS) came into existence with the signing of the Treaty of Basseterre in St Kitts. The following year, 1982, in Trinidad, most of our OECS governments signed the Eastern Caribbean Central Bank Agreement (the ECCB Agreement) bringing an end to the old ECCA. The ECCB Agreement established the Eastern Caribbean Central Bank (the ECCB) with its headquarters in St Kitts. Anguilla signed up and became a full member in 1987.
As every High School CAPE Law student knows, a treaty is not a law. A treaty may be a source of a law. A treaty or convention is an agreement which may be binding on governments among themselves, but it does not affect you or me. To make it a part of the law of the country, an Act of parliament to that effect must be passed by the local legislature.
In 1983, though Anguilla was not yet a full member of the Currency Union, our House of Assembly passed the ECCB Agreement Act, 1983. This enactment made the ECCB Agreement a part of our law. The Act is a very short one. It consists of just 6 brief sections. The bulk of the Act is taken up by the ECCB Agreement. This is set out as a Schedule to the Act. Section 2 of the Act provides that the Agreement is to have the force of law in Anguilla.
There is provision in the Agreement and in the Act for the members of the Currency Union to amend the Agreement. Section 4 of the Act lays down the procedure to be followed. The section says that, once the Agreement is amended by the governments, the Governor must bring the amendment into law in Anguilla by signing an Order published in the Official Gazette. As the Constitution provides, once the Executive Council (Anguilla’s Cabinet) agrees to take a step, and the Governor is named in the relevant law as the official who must sign, then the Governor must sign it for and on behalf of the Government of Anguilla. It is the act of the government, not a personal act of the Governor.
The senior policy making body of the ECCB consists of the Monetary Council. This is made up of the eight Ministers of Finance of the participating governments. Given this management structure, there is always a risk of paralysis. An action that the ECCB might propose for the benefit of one member might be vetoed by another member. In late 2007, our sub-region was seriously affected by the world-wide banking crisis. The ECCB found itself powerless to intervene in the banking crisis in the way a Central Bank is expected. It soon became apparent that the ECCB was ineffective in acting as a lender of last resort for any member country that might get into difficulty. Change in our system of banking supervision was desperately needed. The Central Bank sought advice from the World Bank and the International Monetary Fund on the reforms that had to be made.
In 2012 the Basel Committee on Banking Supervision issued new Core Principles for Effective Banking Supervision. These Core Principles are the minimum standards by which the prudential regulation and supervision of banks and banking systems around the world are judged. There are in all 29 Core Principles for effective banking supervision.
The first of them is that there must be a suitable legal framework for banking supervision. A properly established Central Bank must be empowered to license banks, conduct ongoing supervision, address compliance with laws, and take timely corrective action to address safety and soundness concerns. At the time of the financial crisis, the local Ministers of Finance were the licensing authority for banks of the sub-region, not the Central Bank. Our Central Bank, the ECCB, failed the first of the Core Principles.
The second Core Principle covers the independence and legal protection required for all Central Banks. For a Central Bank to be recognised as effective, it must possess independence and autonomy. Local law must provide protection for the Central Bank and its staff against lawsuits for actions taken while discharging their duties. No person should be permitted to bring a lawsuit which can block a Central Bank in carrying out its banking supervision.
That does not mean that the Central Bank is immune from liability. If a citizen is harmed as a result of any wrongful action taken by the Central Bank, he may still file a lawsuit. If he has suffered loss, he will be entitled to be paid damages or compensation. But he cannot get an injunction that will stop the Central Bank from carrying out its supervisory functions. It was evident to the international banking community that our Central Bank had no such powers or protection under the existing Agreement and local legislation. Our Central Bank failed the second of the Core Principles. The ECCB simply did not meet the basic standards expected of a Central Bank.
The Monetary Council received and considered a number of reports and recommendations from consultants. These were hired to advise on steps needed to upgrade the ECCB. It was imperative the ECCB should pass the Basel Committee’s tests for effective banking supervision. Finally, the Monetary Council agreed to a number of reforms.
In sum, our governments agreed to take eleven steps to bring our Currency Union up to international standards. Among the first of the reforms agreed was the need to amend the ECCB Agreement to give the Central Bank the power to intervene and take necessary action to prevent the collapse of a failing bank and to restructure its business and capital base. Other steps included replacement of the outdated Banking Act with a modern Banking Act to reflect the new banking regime. The new Banking Act was passed by our House of Assembly and became law with the Governor’s assent on 18 April 2016.
At its 81st meeting on 24 February 2015, the Monetary Council agreed that legislative and regulatory reforms were needed to protect the ECCU banking sector. Then-Chief Minister, Hubert Hughes, signed up to the Eastern Caribbean Central Bank Agreement (Amendment), 2015 on behalf of Anguilla. This amendment to the Agreement would not become part of our law until an Order was signed by the Governor incorporating it into our law as provided in the ECCB Agreement Act.
On 22 April 2016, Anguilla’s Governor duly signed the ECCB Agreement (Amendment of Schedule) Order, 2016. By this legislative act, the Governor, as authorised both by our House of Assembly in the provision of section 4 of the ECCB Agreement Act, and by the Executive Council led by Chief Minister Victor Banks, duly brought into law the Amended Agreement signed the year before by Chief Minister Hughes.
Anguillians should be proud that we have finally, if belatedly, shown ourselves to be supportive of the new regulatory standards which the international banking community expects of our banking sector. We were previously viewed as wild-west bankers, not subject to proper regulation by an enabled Central Bank. We cannot be viewed in this light any longer. We now conform to international standards. Our banking sector can stand equal with the rest of the world.
