Some members of the Building and Loan Association (BLA) say they are concerned about the potential impact of the recapitalization plan approved at the general meeting on Thursday.
The Financial Services Authority (FSA), which has been managing the BLA since February, says that EC$38 million is needed to further strengthen the financially troubled building society.
The recapitalization plan says that each member of the association must have at least 100 permanent shares, costing EC$10 each — an EC$1,000 investment.
(IWN will bring you the full details of the recapitalisation plan after verifying some figures)
However, person would not necessarily have to plug out additional cash, since existing investments in the BLA can be converted to the required shares.
Among members of the BLA expressing to I-Witness News concerns about the plan was Junior Bacchus, chair of the BLA Shareholders Committee and government employed economist, politician Luke Browne.
Bacchus told I-Witness News on the sidelines of the meeting — ahead of the plan being put to a vote — that the initiative is “basically going into people’s accounts”.
“These are highhanded things. This is what happened in Greece,” he said in reference to a recent resolution to a banking crisis in that European nation.
“These are not things that we should accept here and the fact is, the very depositors don’t have a vote. They don’t have a vote in the meeting and those kinds of actions, without proper discussion with people are not going to help our cause,” Bacchus further said.
“All of us are going to suffer the loss and the FSA is going to be responsible. They may have done a good job over the pass but they have not handed this election procedure properly,”
He said he would not speak on what he considers to be the option, since he had not “given enough thought at this stage.
“But I know Building & Loan went through worse than this and I know other organizations went through worse than this and survived without rushing into people’s deposits and without doing things this kind of way. You have many, many other mechanisms you can use to build confidence and people will come back,” he said.
Addressing the meeting shortly after, Bacchus said that having looked at the plan, he got the impression “it’s either or”.
“It’s either you go with this plan or the association gets to a situation of failure,” he told the head table, which included Executive Director of the FSA, Sharda Bollers, and her deputy, Eleanor Astaphan.
“Mr. Bacchus, do you have another plan that you would like to share with us?” Bollers responded.
“I believe that we together can really come with another plan,” Bacchus responded.
He said he was worried since the BLA was created and designed on the concept of redeemable shares.
He further said that he knows that the international standard requires permanent shares and all that, the recapitalization plan means that the BLA will no longer offer redeemable shares.
He further noted that the proposal was being made “in the absence of depositors”, who didn’t have a vote at the meeting if they are solely depositors.
He said that by accepting the plan, shareholders are saying to deposition, “You are required to become a shareholder and we are going to go into your account and take, based on what you have two and a half or 5 or 10 per cent.”
Bacchus noted the constitution that the Constitution provides for freedom of association.
“You are saying also that you (depositors) cannot participate, although the decision is going to affect you,” he further said that many persons are depositors only at BLA.
“I am cautioning you,” Bacchus said.
He added: “In fact, if this is what I am seeing, I am going to resign very soon from the credit unions….
“I will resign because if this is what we are going to get, the best we can get from your effort in respect to revitalizing, woe be unto other people. I think we have to give some time; I am going to recommend, give some time. With respect, give some time to reflect,” he said.
Meanwhile, Browne, speaking to I-Witness News separately on the sidelines of the meeting, noted that concerns were raised about the minimum of 100 shares.
I don’t know how extensive their (the FSA’s) research, in terms of the options, have been …” he said.
“We, I think, have to look seriously to see if there are any other options,” he said.
He further spoke of “issues” he had raised in a previous FSA meeting with members of the BLA regarding the election of directors, which also took place Thursday night.
“I thought there really was scope for the FSA to say, appoint some members of the board in the interim period, so that it could have some influence over process still and go about, say, electing a couple directors, maybe two directors at this time, with their appointees.
“So, it gives the FSA scope to still have influence over the process while we are going to manage a transition back to a full board.
“… A lot of what was said tonight points to the direction that there seems to be limited choice …” he said in reference to BLA members having to choose five directors from six options.
“I think some accommodation to that idea (FSA appointing some directors) could really have been made and some of the divergent views on the recapitalisation plan could also be entertained,” he said.
Meanwhile, Bollers told the meeting that the FSA examined “a multitude of options with respect to this recapitalisation plan.
“We haven’t, for example, sat down for two days and come up with this. We brought in regional experts, we brought in international experts and we have come up a recapitalisation plan which we see as the only option moving forward for the survival and continued existence of the Building & Loan Association,” she said.