New fund, old problems

The cost to citizens of the Clico/CL Financial collapse was not limited to the $23 billion in Treasury funds that had to be diverted to stabilise the conglomerate.

The failure of the country’s largest insurance entity had a deep and lasting impact on consumer confidence. It also underlined the continuing failure of the State to convince the population that regulation is strong. And because of the criminal justice system’s failure to bring any single party responsible for the CLF fiasco to justice, a severe blow has been dealt to our justice system.

So that the newly created National Investment Fund (NIF) — which will be the stable into which CLF group assets are placed for the benefit of unit-holders — must be more than just a vehicle to resolve the Clico issue. It must be above reproach and, furthermore, it must add value to the financial well-being of the nation in a way that recompenses for 2009.

Consider to what use the State could have placed the $23 billion used in the 2009 bailout. Had those funds been available today, Trinidad and Tobago would have had a much softer cushion upon which to land.

Prime Minister Dr Keith Rowley’s assurance on Sunday that units of the NIF will be “available for purchase by all” is welcomed as a matter of policy. However, the Prime Minister must do more than simply mouth policy. A real effort must be made to ensure the fund is available to the widest possible share-ownership. We cannot afford a repeat of the First Citizens Bank (FCB) initial public offering fiasco.

Care must also be taken not to repeat the mistakes of the past. It is clear the NIF will overlap with a range of interconnected commercial interests which, in theory, still retain the potential for systemic shock. For instance, the Prime Minister indicated shares in Republic Bank and Angostura will be among the NIF’s possible assets. This fund must be properly managed. It needs to be subject to specific legislation, not secret rules devised by the Civil Service. Measures need to be put in place to ensure none of the wheeling and dealing which took place at CLF take place at the NIF.

The regulation which might have prevented the Clico fiasco will also be required to steer this new fund in the right direction.

Sadly, however, efforts to revamp our regulatory framework appear dead in the water. While a securities law of questionable merit was passed in 2012, a bill to reform the insurance sector is yet to be enacted. So at the end of the day we have a brand new fund, but the same problems from 2009