The US swiftly recovered from the financial crisis mainly due to quantitative easing, when the US Treasury printed hundreds of billions of dollars to pump into the stock market. In Britain the Bank of England printed money for government to buy up the failing UK banks. By contrast, in Anguilla the Eastern Caribbean Central Bank and the local government stood by as the two domestic banks continued to lend hundreds of millions of dollars to borrowers who would never be able to repay their loans. The shareholders had no idea what was going on.
The National Bank of Anguilla (NBA) was held by 4000 shareholders in an island with a population of 14,000. In 2008 its assets stood at over EC$1 billion. That was the last year the bank held an Annual General Meeting of its shareholders.
In 2008 Flag Luxury Resorts, the major real estate development company on the island, collapsed. When the 400 workers were sent home approximately 25% of the private sector became unemployed overnight. Loans that had previously been religiously serviced immediately became bad loans.
2008 was the last year that NBA published its accounts. No annual general meeting was held after that date. It was rumoured the Central Bank had rejected the company’s accounts. No explanation was forthcoming.
In 2013 the Central Bank moved in on NBA and another private bank putting them into conservatorship. The uncomprehending islanders were told it was to save the banks. Local deposits were safe. By contrast, the international depositors in the seized banks were not so lucky. They had no access to their funds amounting to many tens of millions of US dollars. The result is expensive litigation in the courts of Anguilla and New York.
In 2016 government announced its banking solution. The good assets of the two banks were transferred to a new bank with government as its sole shareholder. The bad assets were transferred to an asset management company which would try to collect.
Prudential guidelines mandate that no more than 5% of bank loans are permitted to be in default. By the time the Central Bank moved in 2008 some 50% of NBA’s $1 billion in loans were non-performing. At all times, the board of directors were well aware of this. Only one of them resigned.
When asked why they had taken no steps to collect on the bad loans before the Central Bank moved in, the directors privately explained they were between a rock and a hard place. If they wrote off the bad loans and placed the debts in the hands of the lawyers, half the capital of the banks would be written off. The sale of the loan securities would ruin the defaulting borrowers. The borrowers were their ex-schoolmates, if not their brothers and sisters. With the collapse of Flag, the market for real estate was depressed. Nothing could sell. Further, the law protecting borrowers was so restrictive that the banks had no chance of selling the securities to repay the bad debts. That was the rock. The alternative was to continue as before, hope the economy would turn around, and all the bad debts would become good once again. This was the hard place. The bank might be lost, but there was no down side for the directors personally. They chose this option.
Up to today, not even the names of the major defaulters are published so fingers can be pointed. They continue to sit in the front pew in church, and to take the head of the table at social events.
It gradually dawned that there was no question of punishing any of the management or the directors of the two closed down banks. Whatever investigations took place, government kept the results secret. We were told that people’s banking business was confidential. No one went to gaol. No one got sued. After all, any negligent bank officers and directors are close family and associates of legislators, ministers, Permanent Secretaries, and senior police officers. There will never be any report on who was to blame for Anguilla’s fall from financial grace. No one will ever be punished for the loss of the banks.
Gradually a palpable sullenness has come to dominate the mood of most Anguillians. The lack of confidence of Anguillian society in its leadership is as thick as cold porridge.
We hear on the radio complaints that the EC$800 million public debt will burden generations-to-come. We hear from lawyers that the confiscation of the international depositors’ funds will kill confidence in Anguilla’s banks. Anguillians’ eyes glaze over as we listen even without taking it in.
We hear the loudest voices on radio talk-shows warning of coming Armageddon. Loudmouths spout obvious made up conspiracy theories. Some of the worst of the defaulting borrowers have led what little protest there has been against the government takeover of the banks. Their brazenness contrasts with the humility of the average Anguillian left to contemplate the unexplained loss of their nest eggs of investment.
Meanwhile Anguillians who previously held EC$1 billion in bank capital now hold worthless shares in the old banks that have been stripped of their assets. Only the receivers benefit from the continuing liquidation of the two banks at the rate of hundreds of US dollars an hour. Soon there will be nothing left. The 5000 Anguillians who held some EC$30 million in an earlier failed investment company promoted by NBA can only shake their heads in pain as the directors continue to pretend to be directing anything.
In September 2017 Hurricane Irma wiped out our private and public infrastructure. The total damage suffered is estimated to be close to EC$900 million dollars. Anguillians got up and dusted ourselves off. Mainly using our private resources we rebuilt our private properties. We were called resilient. Perhaps we were just numb from the earlier financial beating we suffered. We shareholders lost a billion dollars with the 2013 collapse of NBA alone.
Local hardware stores and supermarkets become more and more run-down, as Chinese financed replacements flourish. Since 2008 several hundred Chinese migrants appear to have benefited from our liberal work permit policy. On every street corner, new Sports Bars bearing bright signs illustrated with paintings of scantily dressed ladies on them flourish. They employ large numbers of desperate Venezuelan and Santo Domingo girls imported with the permission of an acquiescent government. Disillusioned Anguillians walk past these new business opportunities every day on our way to church or work.
The one bright star was the Social Security Fund. The Board holds the monies in the Fund in trust for the workers of Anguilla to whom the benefit of the monies belong. The monies are to be invested so the Fund grows and produces profits for future generations to benefit. The most sacred duty of a Social Security Board is to protect the Fund against attempts by desperate governments to dig into it. Government has an unlimited number of worthwhile projects for the public good that need funding.
So, it was as if an anaesthetising hypodermic needle had been inserted into our collective spines when earlier this week we heard a government minister claiming proudly on radio that he had convinced the Anguilla Social Security Board to let him have $5 million (US or EC was not revealed) of the Fund to invest in purchasing private land to enlarge his favourite public project in his constituency. The Board has not confirmed this is true. The Board has not said it is not true. Clearly such a use of Social Security funds will produce no income and is not a real investment for the benefit of the workers. It is a fraud on the workers of Anguilla. Anguillians are paralysed by fear at the prospect this claim is true. If the Fund can be so easily dipped into by one smooth-talking minister, then nothing in Anguilla is sacred any longer. All is lost.
Now government has announced that it has committed to selling the major part of its shares in the national electricity company, the water company, and the new bank. These are all exciting new opportunities we are told. We shake our heads in disbelief on hearing this. The blows we have received over the last decade have drained us of resources. We have no money left over to invest in these projects. We are not just dispirited, we are gutted.
It is incredible that anyone would believe that Anguillians would take another chance of investing our savings in any local public company ever again. The Chinese will have to be invited in if government is to have any chance of unloading its shares.
