CL Financial

Last updated
C L Financial Limited
TTSE:  CIF
Industry Insurance financial services
Founded1993
Headquarters41 - 43 St. Vincent Street
Port of Spain, TT.
Key people
Lawrence Duprey, Chairman & CEO
Products Insurance

CL Financial was the largest privately held conglomerate in Trinidad and Tobago and one of the largest privately held corporations in the entire Caribbean, before the company encountered a major liquidity crisis and subsequent bailout in 2009.

Contents

Founded as an insurance company, Colonial Life Insurance Company (CLICO) by Cyril Duprey, it was expanded into a diversified company by his nephew Lawrence Duprey. CL Financial then became one of the largest local conglomerates in the region, encompassing over 65 companies in 32 countries worldwide with total assets exceeding TT$100 billion. [1]

However, CL Financial experienced a liquidity crisis that resulted in a "bail out" agreement by which the government of Trinidad and Tobago loaned the company funds ($7.3 billion as of December 2010) to maintain its ability to operate, and obtained a majority of seats on the company's board of directors. [2] As of late 2010, the company remained in a tenuous position amid tense negotiations with the government, [3] and as of February 2011, the company's web site (www.clfinancial.com) was no longer functioning.

CL Financial started out as a holding company for Colonial Life Insurance Company (Trinidad) Limited (Clico) in 1993.

2009 liquidity crisis

In a Trinidad Guardian press release on January 30, 2009, it was announced that the TT Government would "bail out" CL Financial, the parent company of Clico, Angostura and several other local and regional businesses. [4] Key points disclosed were:

During a press conference held later the same day, Central Bank Governor Ewart Williams released a statement [5] revealing that the Bank and the Ministry of Finance had taken control of the assets and liabilities of Colonial Life Insurance Company, Clico Investment Bank (CIB) and Caribbean Money Market Brokers (CMMB). The statement explained that liquidity challenges which CIB had been facing for some weeks came to a head when an unusually high level of withdrawal requests put a strain on available liquid resources. Clico was also facing liquidity problems, to a lesser extent. On January 13, 2009, Clico's Chairman formally raised the issue of possible financial assistance from the Central Bank.

The statement highlighted the contagion risks that financial difficulties in CL Financial Group could have on the overall financial system of Trinidad and Tobago and the Caribbean region: The Group controls over TT$100 billion of assets in at least 28 companies located throughout the Region and the world. The Group's financial interests cover several industry sectors including banking and financial services, energy, real estate and manufacturing and distribution. The four largest financial institutions in the Group manage assets of over TT$38 billion, over 25 percent of the country's GDP. The Group's holdings include the British American Insurance Company Limited, one of the main insurance companies in the Eastern Caribbean.

In the Bank's view, the financial difficulties being faced by CIB and Clico resulted from:

According to the statement, the Central Bank, the Ministry of Finance and the CL Financial Group have agreed to a strategy intended to deal with the liquidity challenges of CIB and Clico, and to address the underlying problems that gave rise to the current financial stress. The principal objectives are to ensure that resources are available to meet withdrawals of third-party CIB depositors and Clico policy holders, protect the funds of the depositors and policy holders, maintain public confidence in Clico and reinforce public confidence in the financial sector as a whole:

The Central Bank will:

Also, CL Financial will divest additional assets to help fund Clico's existing Statutory Fund deficit. In exchange for collateral and an equity interest in Clico, the Government will provide any additional funding needed to eliminate this deficit, and will "act as a catalyst" for Clico to implement changes to its business model and corporate governance structure - "The intention will be to return Clico to its original moorings".

Mr Williams emphasized that CIB depositors' funds are safe, and assured Clico's policy holders that the long-term future of Clico will be guaranteed. He also emphasized the tremendous strength of the TT financial system, "the envy of the region", and pointed out that, in contrast to the illiquidity of CIB, the rest of the TT banking system is experiencing excess liquidity, an impressively low percentage of non-performing loans, and a more than adequate level of provisions against bad loans. Mr Williams acknowledged the cooperation received from Mr. Duprey and the CL Financial Group, recognized First Citizens Bank for its role, cautioned the entire financial sector to "let competition take a back seat" and support the Government in keeping Clico as a functioning entity, and called for the support of the community of depositors and policyholders. [5] [6] [7] [8]

Mrs Karen Nunez-Tesheira, T&T Minister of Finance, also made a statement describing the urgency with which the government and the Bank is pursuing changes to the regulatory framework governing financial institutions, and reiterating government's commitment to protecting depositors. [9]

A memorandum of understanding (MOU) describing the intended actions, [10] also dated January 30, was signed by the Minister of Finance (on behalf of the Government) and Lawrence Duprey (acting for CL Financial Limited and its affiliates). According to the MOU, the threat was the financial condition of three companies: Colonial Life Insurance Company Trinidad Limited (CLICO Trinidad), CLICO Investment Bank Limited (CIB) and British American Insurance Company Trinidad Limited (BA Trinidad). In return for Government protection of the interest of depositors, policy holders and creditors of these three institutions, CL Financial agreed to sell its Republic Bank shareholdings, its MHTL shareholdings, its CMMB Shareholdings, and any other assets as required.

According to the Trinidad Express, Winston Dookeran, Congress of the People (COP) leader and former Central Bank governor, said Central Bank Governor Ewart Williams, First Citizens CEO Larry Howai, CL Financial chairman Lawrence Duprey and Finance Minister Karen Nunez-Tesheira had "delivered a damning indictment of their collective stewardship while trying to distract the nation with a pathetic display of self congratulation at their ability to speak with the same forked tongue". [11] He expressed concern that the Governor was unable to state the size of the financial hole to be plugged at CLICO. The Trinidad Express also noted that the "meltdown" leaves the TT $12 billion Essar Steel Caribbean Limited (ESCL), an India-based foreign investment project, in limbo - including the associated natural gas supply contract which was expected to boost revenues of the National Gas Company by eight per cent. [12]

The Jamaica Observer report on the rescue noted that in 2008 CL Financial purchased an 86.6 per cent stake in Lascelles de Mercado (parent company of Appleton Jamaica Rum), and also bought a 40 per cent stake in Caribbean Money Market Brokers from Jamaica Money Market Brokers. [13]

In Barbados, the Nation Newspaper reported that Leroy Parris, chairman of CLICO Holdings Barbados Limited, sought to allay fears among policyholders and other investors. Parris said what had occurred in Trinidad "had no effect on Barbados and the Eastern Caribbean". Parris stressed that the Bajan company was autonomous and its management structure, balance sheets and auditing were totally separate. "CLICO in Barbados is separate from the Trinidad and Tobago operation which is supervised by the Central Bank and Ministry of Finance. In Barbados, CLICO is supervised by the Supervisor of Insurance and the Ministry of Finance. We are regulated by Barbados and the Barbados Government," he stated. The chairman also stated that the capital projects involving CLICO Holdings were still on stream, including a B$60 million housing project in Clermont, St Michael and the B$140 million redevelopment of historic Sam Lord's Castle hotel. [14]

Footnotes

  1. ↑ "OECS to consider CLICO debacle". Caribbean News Agency (CANA). 2009-02-02. Archived from the original on 2009-02-06. Retrieved 2009-02-03. The development at CL Financial, which boasts of over US$100 billion of assets in at least 28 companies, has sent shock waves throughout the region.
  2. ↑ Yetming: New Clico deal, or No money for shareholders Archived March 3, 2016, at the Wayback Machine , Trinidad & Tobago Guardian Online, 2010-12-04. (Accessed February 2011)
  3. ↑ CL Financial Bailout Archived January 11, 2016, at the Wayback Machine , Afra Raymond. (Accessed February 2011)
  4. ↑ "Guardian - Government to bailout CL Financial". Archived from the original on February 2, 2009.
  5. 1 2 "Express - Central Bank Statement".[ dead link ]
  6. ↑ "Guardian - CL Financial Bailout - 1 of 3". Archived from the original on February 3, 2009.
  7. ↑ "Guardian - CL Financial Bailout - 2 of 3". Archived from the original on February 3, 2009.
  8. ↑ "Guardian - CL Financial Bailout - 2 of 3". Archived from the original on February 3, 2009.
  9. ↑ "Statement - Minister of Finance".
  10. ↑ "MOU - Newsday". 12 February 2009.
  11. ↑ "Express - Dookeran wants answers".[ dead link ]
  12. ↑ "Express - $12B steel project in limbo".[ dead link ]
  13. ↑ "Jamaica Observer". Archived from the original on February 3, 2009.
  14. ↑ "Nation - Don't panic!". Archived from the original on May 26, 2011.

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Trinidad and Tobago</span> Economy of the country

The economy of Trinidad and Tobago is the third wealthiest in the Caribbean and the fifth-richest by GDP (PPP) per capita in the Americas. Trinidad and Tobago is recognised as a high-income economy by the World Bank. Unlike most of the English-speaking Caribbean, the country's economy is primarily industrial, with an emphasis on petroleum and petrochemicals. The country's wealth is attributed to its large reserves and exploitation of oil and natural gas.

<span class="mw-page-title-main">Scotiabank</span> Canadian multinational bank headquartered in Toronto

The Bank of Nova Scotia, operating as Scotiabank, is a Canadian multinational banking and financial services company headquartered in Toronto, Ontario. One of Canada's Big Five banks, it is the third-largest Canadian bank by deposits and market capitalization. It serves more than 25 million customers around the world and offers a range of products and services including personal and commercial banking, wealth management, corporate and investment banking. With more than 92,001 employees and assets of Can$1,136 billion, Scotiabank trades on the Toronto and New York exchanges. The Scotiabank swift code is NOSCCATT and the institution number is 002.

<span class="mw-page-title-main">Bank run</span> Mass withdrawal of money from banks

A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking system, numerous customers withdraw cash from deposit accounts with a financial institution at the same time because they believe that the financial institution is, or might become, insolvent. When they transfer funds to another institution, it may be characterized as a capital flight. As a bank run progresses, it may become a self-fulfilling prophecy: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy. To combat a bank run, a bank may acquire more cash from other banks or from the central bank, or limit the amount of cash customers may withdraw, either by imposing a hard limit or by scheduling quick deliveries of cash, encouraging high-return term deposits to reduce on-demand withdrawals or suspending withdrawals altogether.

<span class="mw-page-title-main">Petrotrin</span> State-owned oil company in Trinidad and Tobago

Petroleum Company of Trinidad and Tobago Limited was a state-owned oil company in Trinidad and Tobago. Its principal activities were the exploration, development and production of hydrocarbons in addition to the manufacturing and marketing of petroleum products.

A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy.

<span class="mw-page-title-main">CIBC FirstCaribbean International Bank</span> Barbadian subsidiary of CIBC

CIBC FirstCaribbean International Bank (FCIB) is a financial services company based in Barbados and the Caribbean subsidiary of the Canadian Imperial Bank of Commerce (CIBC). The bank was founded in 2002 as FirstCaribbean International Bank through the merger of the Caribbean operations of Barclays Bank and CIBC, and in March 2006 both CIBC and Barclays announced that Barclays wished to exercise their option to exit the Caribbean venture completely resulting in CIBC gaining majority-control of the bank. In June 2011, it was announced the bank would be renamed CIBC FirstCaribbean Bank "to be more closely aligned to the CIBC brand, while still maintaining the FirstCaribbean name and local identity." The majority of the bank's revenues are generated by its operations in Barbados, the Bahamas and the Cayman Islands.

The Royal Bank of Trinidad and Tobago (RBTT) was a commercial bank based in Trinidad and Tobago and one of the largest commercial banking corporations in the Caribbean region. As of 2008 RBTT Holdings had a group asset base of over US$6.2 billion dollars. The RBTT group of companies operated several commercial banking businesses in other neighbouring islands, as well as various investment holdings in various parts of the Trinidad and Tobago economy. On 26 March 2008, RBTT Shareholders voted 98.18 percent in favour of selling the bank to the Royal Bank of Canada (RBC), who previously had divested the bank in 1987. On 16 June 2008, RBC completed the acquisition. RBTT Financial Holdings Limited and RBC Holdings Limited, a subsidiary of RBC, will amalgamate and continue as a wholly owned indirect subsidiary of RBC. The head office of the Caribbean operations for RBC will be located at Port of Spain, the capital of Trinidad and Tobago, and the site of RBTT's headquarters.

Cyril Lucius Duprey OBE was a Trinidad and Tobago businessman. He founded the Colonial Life Insurance Company in 1936, the first locally owned insurance company. The company was expanded into the CL Financial Group, which was run for many years by his nephew, Lawrence Duprey. In 1956, Duprey was awarded the Order of the British Empire (OBE) and in 1977 he received Trinidad & Tobago's Chaconia Medal (Gold). His nephew is now the chairman of CL Financial.

<span class="mw-page-title-main">Trinidad and Tobago Stock Exchange</span> Stock index of Trinidad and Tobago

The Trinidad and Tobago Stock Exchange (TTSE) is the main stock exchange in the Republic of Trinidad and Tobago, and the largest stock exchange in the Caribbean region by market capitalization. As a member-state of CARICOM several companies from Barbados, Jamaica, Saint Vincent and the Grenadines and the Eastern Caribbean Securities Exchange also cross-list their stocks onto the Trinidad and Tobago Stock Exchange. The unique four symbol alphanumeric Market Identifier Code (MIC) used to identify the TTSE as defined under ISO 10383. of the International Organization for Standardization (ISO) is: XTRN.

<span class="mw-page-title-main">Republic Bank</span> Caribbean bank and financial service provider

Republic Bank Limited is a leading Caribbean financial institution headquartered in Trinidad and Tobago. It has operations in Anguilla, Barbados, the British Virgin Islands, the Cayman Islands, Dominica, Ghana, Grenada, Guyana, St. Kitts and Nevis, Saint Lucia, St. Maarten, St. Vincent and the Grenadines, Suriname and Trinidad and Tobago. It was formerly a division of Barclays Bank in Trinidad and Tobago.

<span class="mw-page-title-main">Central Bank of Trinidad and Tobago</span> Central Bank of Trinidad and Tobago

The Central Bank of Trinidad and Tobago is the central bank of Trinidad and Tobago.

<span class="mw-page-title-main">Too big to fail</span> Concept in economics

"Too big to fail" (TBTF) is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure. The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois. The term had previously been used occasionally in the press, and similar thinking had motivated earlier bank bailouts.

<span class="mw-page-title-main">First Citizens Bank (Trinidad and Tobago)</span>

First Citizens (FCB) is a bank based in Trinidad and Tobago. First Citizens has over TT$38 billion in assets, 25 branches in Trinidad and three in Tobago and five in Barbados. It also has a representative office in Costa Rica, which handles its Latam business. It wholly owns First Citizens (St. Lucia) Limited, which it established as an offshore financial vehicle for the Bank and its subsidiaries and also to conduct selected banking and financial service operations in the Caribbean Region. The Group's Chief Executive Officer is Karen Darbasie and the office of Group Chief Financial Officer is held by Shiva Manraj.

In financial economics, a liquidity crisis is an acute shortage of liquidity. Liquidity may refer to market liquidity, funding liquidity, or accounting liquidity. Additionally, some economists define a market to be liquid if it can absorb "liquidity trades" without large changes in price. This shortage of liquidity could reflect a fall in asset prices below their long run fundamental price, deterioration in external financing conditions, reduction in the number of market participants, or simply difficulty in trading assets.

GraceKennedy Limited is one of the Caribbean's largest conglomerates, with several diversified companies in the Caribbean, Europe and North America.

In the period September 2007 to December 2009, during the events now widely known as the Global Financial Crisis, the UK government enacted a number of financial interventions in support of the UK banking sector and four UK banks in particular.

The subprime mortgage crisis reached a critical stage during the first week of September 2008, characterized by severely contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions.

The nation of Trinidad and Tobago has been the leading supporter of the Caribbean Community (CARICOM). Trinidad and Tobago was one of the four members in 1973 which then along with Barbados, Guyana and Antigua and Barbuda moved to establish the organisation that today it known as the Caribbean Community and Common Market. The new organisation because a successor to the Caribbean Free Trade Association (CARIFTA) by the Treaty of Chaguaramas, of which Trinidad and Tobago was a leading member and also a founding member.

ANSA McALLimited is one of Trinidad and Tobago's largest conglomerates, with several diversified companies in the Caribbean, Europe and North America. It is traded on the Trinidad and Tobago Stock Exchange as AMCL.

Trinidad Petroleum Holdings is a state-owned oil company in Trinidad and Tobago. Its principal activities are the exploration, development, and production of hydrocarbons, operations it conducts through its primary subsidiary, Heritage Petroleum Company Ltd. Trinidad Petroleum Holdings also owns Guaracara Refining Company Ltd, which operates the nation's only petroleum refinery. It also owns the Paria Fuel Trading Company subsidiary, which imports refined petroleum products, and stores and distributes them domestically.

References

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.