Gov’t moves to protect non-bank investments

With Financial Services Commission (FSC) records showing more than $2 billion in savings in the credit union movement up to June this year, Government is strengthening regulation of the non-bank financial sector to prevent a recurrence of the 2009 CLICO collapse.

The effort is being made through the Financial Services Commission (Amendment) Act 2022 which was passed in the Senate on Wednesday.

Introducing the legislation in the Upper House, Minister of State in the Prime Minister’s Office Senator Dr Shantal Munro-Knight pointed out that even though Barbadians’ finances might have been stretched due to the COVID-19 pandemic, they were becoming increasingly invested in the credit union movement which has over $3 billion in assets.

“Therefore, there is a high level of liquidity within the sector. And this is significant because, again, when we talk about the credit union it is often persons who are investing sometimes small amounts from their pay pack in order to be able to save for their children’s education, to be able to save for their homes, in order to save for their small businesses. So the importance of a strong regulator cannot be underestimated,” she said.

Reflecting on the CLICO fiasco, the government Senator questioned what would happen if the credit union movement collapsed.

She stressed the importance of a strong regulatory framework to oversee the operations of all non-bank financial institutions.

“The FSC regulates over 800 entities that collectively manage billions of dollars in assets representing significant investments by Barbadians…. As Barbadians, we are asked to invest more to make sure that our savings actually grow. We therefore on the other end need to be confident that as we do that, that they will be safe,” Senator Munro-Knight said.

She also stressed that Barbadians must be educated about how the FSC can help protect their savings and assets.

The Senator noted that Government had established the Financial Literacy Bureau in 2020 to ensure that ordinary Barbadians understand the importance of investment and creating generational wealth.

“So we are focusing on making sure that we have a strong regulatory environment in the context of the FSC, but also that there is sufficient education that people are aware of in terms of the operations,” she said.

Munro-Knight said the FSC, which was previously subsidised by the Government, now has the green light to charge fees that will allow it to be able to independently manage its affairs.

“The fees that are charged, represented within the context of the amendment, are fees that have been benchmarked internationally and regionally. And in the context of the development of those fees and charges, the FSC has reported that it looked to make sure that it would be fair across the entities that would have to pay those fees,” she explained.

The Financial Services Commission (Amendment) Act 2022 also makes provision for the Director of Finance and Economic Affairs, or their nominee, to serve as an ex officio of the FSC to ensure that the Government is fully aware of what is happening in the non-bank financial sector. (AH)