Opposition Shadow Finance Minister Nazim Burke has welcomed the idea behind the new Banking Act which was approved by the Lower House last Thursday as it relates to regulating the operations of the financial sector in the country.

The act gives a stiff warning to person carrying on banking business or holding himself out as carrying on banking business in Grenada without a licence as granted by the Minister of Finance.

The act noted that every licensed financial institution operating as a bank must have the minimum required capital of not less than five million dollars, and if operating as a credit or other financial institution, not less than one million dollars.
The legislation mandates that banks must maintain information systems to identify loans and should record the amount of such loans to the Central Bank from time to time.

As it relates to Audit, Information and Examination, the Act said that financial institutions need to appoint annually an auditor who is satisfactory to the Central Bank. The legislation noted that the role of the Auditor is to examine the books and records and to make a report on the annual financial statements and financial position of the institution.

The act mandates that in every report submitted for scrutiny the auditor should state whether the balance sheet and profit and loss account give a true and fair reflection of the state of affairs of the financial institution.

It is also aimed at certifying whether suitable measures to counter money laundering and to combat the financing of terrorism have been adopted by the financial institution.

In his contribution on the Act, Burke noted that the legislation demonstrates a level of maturity on the part of the Ministry of Finance. He recalled that $US473 million is still to be accounted for following the collapse of the controversial offshore outfit known as First International Bank of Grenada (FIBG) which was allowed to do business on the island by the Keith Mitchell-led New National Party (NNP) government.

Burke, the Parliamentary Representative for St. George's North-east, said the country cannot afford to have another financial scandal on its hand. First Bank collapsed with depositors mainly from the United States and Canada losing millions of dollars in deposits.

Speculation is rife that FIBG bankrolled Mitchell's party to the tune of millions of dollars in its 15-0 clean sweep of the polls in the 1999 general elections in Grenada.

According to Burke, there is a need for everything to be done to ensure that on-shore banks like commercial entities are not affected as a result of the operations of offshore entities. He believes the legislation will improve the financial integrity of the country, noting that "those people who do not have licence to operate must not hold themselves out as a bank'.

The five recognised commercial banks operating in Grenada are Nova Scotia, RBTT Bank, National Commercial Bank of Grenada, Grenada Co-operative Bank Limited and First Caribbean International Bank.

The status of Capital Bank International, operated by St. George's businessman Finton De Bourg remains uncertain with the Eastern Caribbean Central Bank (ECCB). Finance Minister Anthony Boatswain who tabled the legislation noted that everyone in the country is aware of the collapse of a certain bank which once operated in Grenada.

He noted that this occurred because there was inadequate supervision of the banking sector on the island. According to Minister Boatswain, the new legislation will repeal and replace the 1993 Banking Act.

He added that the present legislation will now make it easier to revoke a bank licence if it is discovered that the institution is conducting financial transaction without the authority to do so. The ECCB is known to have raised concerns with Grenada's Ministry of Finance with the operations of Cap Bank.