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The Eastern Caribbean Central Bank (ECCB) says it had been monitoring closely for eight years the operations of the 114-year-old First St. Vincent Bank, which it placed under receivership on Friday.

The ECCB, which is the regulator of banking business in the Eastern Caribbean Currency Union (ECCU), said the monitoring  included daily ongoing off-site surveillance; on-site examination in 2018, Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) examination in 2019, and most recently, on-site examination over the period 15 – 26 May 2023. 

The ECCB said the examinations revealed “significant and sustained breaches of the Banking Act, 2015, especially in respect of capital requirements; high credit risk and low earnings performance; poor accounting and corporate governance practices; and ineffective risk management systems.

“The foregoing deficiencies posed a serious threat to the depositors of FSVB and the future viability of the institution,” the ECCB said.

It said that notwithstanding the issues identified, the ECCB granted the board and management of FSVB time and opportunity to address the identified breaches and mitigate against the continued erosion of capital to place the institution on a sustainable path and become compliant with the Banking Act, 2015.

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“During this period of forbearance, the ECCB also issued the following directives:

“Restriction on lending to only cash secured facilities on 9 April 2018 (to protect depositors); and

Restriction on the payment of emoluments and other benefits, including board fees on 12 December 2018 (to protect liquidity and reduce capital erosion),” the statement said. 

The ECCB said that in keeping with its mandate to protect the interest of depositors and creditors of FSVB, the ECCB, in consultation with the Government of SVG, has implemented a two-phase resolution strategy for FSVB.

During phase I, the ECCB has appointed David Collins of Interpath East Caribbean Ltd. (trading as Interpath Advisory), as receiver to assume control of, and secure the assets of FSVB  for an initial period of six months.  

The receiver will liquidate the institution via the sale of viable assets and wind up its affairs in an orderly manner to minimise risk to financial stability.

During phase II, a purchase and assumption agreement will be executed with BoSVG effective June 1, 2023, “to acquire certain assets and assume certain liabilities of FSVB.  

“The remaining assets and liabilities will remain in the Receivership for liquidation,” the ECCB said. 

The ECCB said that depositors’ accounts valued up to EC$100,000 will be transferred to BoSVG.

For accounts valued over EC$100,000, the sum of EC$100,000 will be transferred to BoSVG and the balance (exceeding EC$100,000) will remain in the receivership.

“Depositors with balances up to $100,000 will have full access to their funds from 1 June 2023 at BoSVG’s Card Distribution Centre, 1st Floor, Halifax Street Branch.”

ECCB said that as at March 31, FSVB reported EC$46.8 million in total assets, which accounted for 1.6% of the total banking assets (EC$2,953.4 million or approximately EC$3 billion) in SVG.

The ECCB said that the banking sector in SVG “remains stable”, adding that the four licensed financial institutions that operate in the country are continuing to do business as normal. 

“The issues which warranted the closure of FSVB were very specific to the institution.  Furthermore, the closure of FSVB is not related to the ongoing community banking challenges in the United States or elsewhere,” the ECCB said.

“The challenges faced by some community banks within the United States stem primarily from the rapid increase in interest rates by the Federal Reserve (US Central Bank) as it attempts to reduce very high inflation.

“The ECCB gives the assurance that it will continue to exercise its powers to maintain financial stability and safeguard the soundness of the ECCU banking system.”

ECCB has invited the media to a press conference next Tuesday to explain the receivership.

The monetary authority said that depositors who wish to obtain more information about their accounts may contact BoSVG at 784 452 4385/4395 or email address: [email protected] or the receiver at 784 456 1873 or email address: [email protected].