Clico bailout plan on hold
By CLINT CHAN TACK Monday, October 4 2010
GOVERNMENT bailout plan for Colonial Life Insurance Company (Clico) has been put on hold until it has reached a consensus with these policyholders and other stakeholders on the way forward, top government officials said yesterday in the wake of Prime Minister Kamla Persad-Bissessar’s statement on the CL Financial crisis in the House of Representatives last Friday.
In her statement, the Prime Minister conceded that people’s livelihoods and savings plans “may be adversely affected” by the plan which Finance Minister Winston Dookeran proposed in his budget presentation in the House on September 8.
Against that background, Persad-Bissessar said an inter-ministerial sub-committee team led by Food Production Minister Vasant Bharath would meet with various stakeholders “to take their views on board.”
The Prime Minister explained that this sub-committee will be supported by technocrats from the Finance Ministry and “in service of the people, this committee will be mandated to listen to the people.” Government officials yesterday told Newsday that this means the bailout plan proposed in the budget will not be implemented until Bharath’s sub-committee completes its discussions with all stakeholders and then reports back to Cabinet to make a final decision. The officials also said the Central Bank Amendment Bill 2010 which Government decided not to debate in the House last Friday was designed to implement the bailout plan proposed by Dookeran who left the country yesterday to attend a meeting of Commonwealth finance ministers in Washington DC. That meeting is scheduled to take place at the International Monetary Fund HQ1 Building on Thursday and Friday.
Clico Policyholders Group (CPG) president Peter Permell said he has yet to receive word from Bharath, but expects the minister would contact the group sometime this week to arrange a meeting. Efforts to contact Bharath were unsuccessful but sources said he is currently putting together the members of the subcommittee.
Permell said Bharath’s subcommittee provides “an official line of communication” to the Government.
He also said Government’s decision to withdraw the Central Bank Amendment Bill means that Clico policyholders can take legal action against the Government. However, Permell stated that this would only be used as a last resort because the CPG is committed to “dialogue and consensus” on this critical issue. The Government’s plan proposes that depositors in the short term investment and mutual funds whose principal balances are less than $75,000 will each be paid $75,000.
Depositors in these instruments whose principal balances exceed $75,000 will be paid through a Government IOU amortised over 20 years at zero interest. The former measure will cost Government $1.5 billion over the next four years.
Government will provide $1.8 billion in the next fiscal year to provide a funding mechanism for the latter measure.