24 October, 2009
National Bank of Anguilla and Caribbean Commercial Bank are being forced to merge together. Yes, I want to come back to this topic. The Chief Minister, and Chairman of the Board of the Caribbean Commercial Bank, has told us at one of his press conferences that the Eastern Caribbean Central Bank is demanding amalgamation. I want to focus on that aspect of the issue. The Central Bank is the regulator of the two banks. The banks are helpless to resist the pressure coming from such a quarter, regardless of how mindless it is. Refusal appears to be out of the question. The two banks are apparently working to put the plan into effect without further delay.
In order to have an idea of what a merger would mean in financial terms, I searched the internet for financial data on the two banks. NBA was not difficult to find. The 2008 Report and Accounts are on the NBA website. The balance sheet at page 23 reveals that the total assets of that bank at the time were EC$1.13 billion, deposits were EC$928 million, and shareholders equity amounted to EC$131 million. I searched for any Annual Report for CCB to see how much they would bring to the marriage. I found their website easily enough. There is no financial information on it that I could locate. I know that as a private bank they are not obliged to make their balance sheets publicly available. I realise that the data is not secret. It is given to the Central Bank on at least a quarterly basis. It is also published in the Official Gazette. However, neither of these sources is online, and CCB’s financial data is therefore essentially unavailable.
We cannot imagine that the figures for CCB can be any greater than those for NBA. Even if CCB brought in the region of EC$1 billion to the table, we are still talking of total assets and liabilities of the merged entities of about EC$2 billion. US$100 equals EC$270. That means that the merged assets will be in the region of US$571 million.
Apparently, the Central Bank has convinced itself that the two local banks are too small to stand on their own. The argument being advanced is probably that the two will become stronger and better able to resist the present economic downturn if they amalgamate. That just does not make sense. In international banking terms, both local institutions are tiny. Why would any regulator be so deluded as to believe that two minnows coming together will be anything else but one minnow with indigestion?
A search of the internet for bank failures in the
during 2009 is revealing. Of the 10 largest bank failures, the deposits of Colonial Bank exceeded US$20 billion. The smallest, New Frontier Bank, had deposits in excess of US$2 billion. The complete list, for those interested, can be checked here. Our two banks are miniscule in comparison to these USA banking failures. What conceivable safety could their amalgamation provide when much larger US and US banks are much more likely to fail than ours are? UK
Heaven alone knows what arguments the ECCB has produced to justify such a dangerous and destructive move. Based on what the Chief Minister said publicly a few days ago, the principle argument appears to be that amalgamation will make it easier for our two banks merged into one to compete! Could it be that all it really amounts to is making life easier for the Central Bank? It gives them one less entity to regulate.
As a shareholder in NBA, I have been provided with no information as to why this dismal step is being even considered. That distresses me. It makes me feel sad and dispirited. It discourages me. It fills me with foreboding.
What is more upsetting is that the plan to amalgamate is being put into effect in secret, by order of the directors, and without consulting the shareholders. Are we the shareholders and depositors not to be told anything until it is a fait accomplis?
Amalgamation for commercial reasons is one thing. Amalgamation at the whim of a regulator is entirely another.
The other result of amalgamation will be that, when the economy rebounds in a few years' time, we the consumers of banking services will no longer have our two most efficient banking service providers competing with each other to our benefit. We shall be left with expensive, inefficient, unfriendly banking services.