The five hundred and eighteen depositors of the ill-fated Capital Bank International Limited will have to wait for sometime before they can be paid their money.
Known as the home-grown indigenous bank with 11 outlets throughout Grenada, Capbank's license was revoked last week Thursday by Minister of Finance, Nazim Burke.
Speaking to reporters after the revocation, Minister Burke said the country is at this time cash-strapped, and it will be difficult for government to take the responsibility at this time to refund money to the depositors.
"It will be unfair perhaps to other persons who do not have their monies deposited there (Capbank) to take the public money and pay to those who have their monies deposited in Capbank," he said.
However, the Finance Minister indicated that as regulators and policy makers, government has a responsibility to protect the integrity of the financial system, and in so doing to ensure that depositors, creditors, and investors in financial institutions "are not taken for a ride and that their interests are protected to the best of our ability."
Burke outlined the rationale used in arriving at the decision to revoke Capbank's license. He said that the opinion of the Eastern Caribbean Central Bank (ECCB) and Attorney General, James Bristol were sought based on documents provided to his ministry by Executive Chairman of Capbank, Finton De Bourg on September 11 giving reasons why the bank's license should not be revoked.
"We came to the view that it was in the best interest of the people of Grenada, it was in the best interest of the stakeholders of the bank... that the license of the bank be revoked", he remarked.
In addition, he said the bank was found to be in breach of a number of provisions of the Banking Act. It was cited that Capbank did not maintain a minimum paid up or unimpaired capital of at least five million dollars as required by section 13 (1) of the Banking Act.
Also, the bank did not maintain the minimum capital adequacy ratio of risk weighted assets to capital of eight percent in accordance with section 15 (1) of the Banking Act.
Another reason given by Minister Burke was that Capbank failed to ensure that the property pledged as security in respect of the bank's largest loan exposure of $18.7 million to Native Hut, a related party, was adequately insured.
This, he said constituted a breach of section 16 (2)(a) of the Banking Act which requires security for any loan in excess of fifteen percent of unimpaired capital to be fully covered by insurance.
"The economy depends on maintaining a strong, vibrant, sound and creditable financial system, and that is what we are trying to maintain in taking the action that we took," Burke said.
De Bourg has since stated that the action taken to have the bank's license revoked is far from over. "This story is far from over. He (Burke) has a prerogative (to revoke the license), he used it, fine. But we are now going to challenge it in court, and we will see where it ends," he said.
