The ECCB
(Amendment of Schedule) Order, 2016
[1] Prior to the
invention of our EC dollar in 1965, and since 1935, the name of our currency
was the “BWI dollar”. Then, our islands entered
into the Eastern Caribbean Currency Agreement. This established the Eastern Caribbean
Currency Authority (ECCA), with headquarters in Barbados. ECCA was authorised to issue the new EC
dollar. Barbados withdrew from the
Currency Union in 1972. Our governments
decided to move ECCA’s headquarters to St Kitts. Gradually, most of our countries became
independent. The name BWI dollar seemed
obsolete. The name was changed to the
“EC dollar”.
The Agreement
[2] In 1981, the
Organisation of Eastern Caribbean States (the OECS) came into existence with
the signing of the Treaty of Basseterre in St Kitts. The following year, 1982, in Trinidad, most
of our OECS governments[1]
signed the Eastern Caribbean Central Bank Agreement (the ECCB Agreement)
bringing an end to the old ECCA. The
ECCB Agreement established the Eastern Caribbean Central Bank (the ECCB) with
its headquarters in St Kitts. Anguilla
signed up and became a full member in 1987.
The Act
[3] As every
High School CAPE Law student knows, a treaty is not a law. A treaty may be a source of a law. A treaty or convention is an agreement which
may be binding on governments among themselves, but it does not affect you or
me. To make it a part of the law of the
country, an Act of parliament to that effect must be passed by the local
legislature.
[4] In 1983, though
Anguilla was not yet a full member of the Currency Union, our House of Assembly
passed the ECCB Agreement Act, 1983.[2]
This enactment made the ECCB Agreement a part
of our law. The Act is a very short one.
It consists of just 6 brief sections.
The bulk of the Act is taken up by the ECCB Agreement. This is set out as a Schedule to the
Act. Section 2 of the Act provides that
the Agreement is to have the force of law in Anguilla.
[5] There is
provision in the Agreement and in the Act for the members of the Currency Union
to amend the Agreement. Section 4 of the
Act lays down the procedure to be followed.
The section says that, once the Agreement is amended by the governments,
the Governor must bring the amendment into law in Anguilla by signing an Order
published in the Official Gazette. As
the Constitution provides,[3]
once the Executive Council (Anguilla’s Cabinet) agrees to take a step,
and the Governor is named in the relevant law as the official who must sign,
then the Governor must sign it for and on behalf of the Government of Anguilla. It is the act of the government, not a
personal act of the Governor.
[6] The senior
policy making body of the ECCB consists of the Monetary Council. This is made up of the eight Ministers of
Finance of the participating governments.[4] Given this management structure, there is
always a risk of paralysis. An action
that the ECCB might propose for the benefit of one member might be vetoed by another
member. In late 2007, our sub-region was
seriously affected by the world-wide banking crisis. The ECCB found itself powerless to intervene
in the banking crisis in the way a central bank is expected. It soon became apparent that the ECCB was
ineffective in acting as a lender of last resort for any member country that
might get into difficulty. Change in our
system of banking supervision was desperately needed. The Central Bank sought advice from the World
Bank and the International Monetary Fund on the reforms that had to be made.
[7] In 2012 the
Basel Committee on Banking Supervision issued new Core Principles for
Effective Banking Supervision. These
Core Principles are the minimum standards by which the prudential regulation
and supervision of banks and banking systems around the world are judged. There are in all 29 Core Principles[5]
for effective banking supervision.[6]
[8] The first of
them is that there must be a suitable legal framework for banking
supervision. A properly established
Central Bank must be empowered to license banks, conduct ongoing supervision,
address compliance with laws, and take timely corrective action to address
safety and soundness concerns. At the
time of the financial crisis, the local Ministers of Finance were the licensing
authority for banks of the sub-region, not the Central Bank. Our Central Bank, the ECCB, failed the first
of the Core Principles.
[9] The second
Core Principle covers the independence and legal protection required for all
Central Banks. For a Central Bank to be
recognised as effective, it must possess independence and autonomy. Local law must provide protection for the
Central Bank and its staff against lawsuits for actions taken while discharging
their duties. No person should be permitted
to bring a lawsuit which can block a Central Bank in carrying out its banking
supervision.
[10] That does not
mean that the Central Bank is immune from liability. If a citizen is harmed as a result of any wrongful
action taken by the Central Bank, he may still file a lawsuit. If he has suffered loss, he will be entitled
to be paid damages or compensation. But
he cannot get an injunction that will stop the Central Bank from carrying out
its supervisory functions. It was evident
to the international banking community that our Central Bank had no such powers
or protection under the existing Agreement and local legislation. Our Central Bank failed the second of the
Core Principles. The ECCB simply did not
meet the basic standards expected of a Central Bank.
[11] The Monetary
Council received and considered a number of reports[7]
and recommendations from consultants.
These were hired to advise on steps needed to upgrade the ECCB. It was imperative the ECCB should pass the
Basel Committee’s tests for effective banking supervision. Finally, the Monetary Council agreed to a
number of reforms.
[12] In sum, our
governments agreed to take eleven steps to bring our Currency Union up to
international standards.[8] Among the first of the reforms agreed was the
need to amend the ECCB Agreement to give the Central Bank the power to
intervene and take necessary action to prevent the collapse of a failing bank
and to restructure its business and capital base. Other steps included replacement of the
outdated Banking Act with a modern Banking Act to reflect the new
banking regime. The new Banking Act was
passed by our House of Assembly and became law with the Governor’s assent on 18
April 2016.
The Amended Agreement
[13] At its 81st
meeting on 24 February 2015, the Monetary Council agreed that legislative and
regulatory reforms were needed to protect the ECCU banking sector. Then-Chief Minister, Hubert Hughes, signed up
to the Eastern Caribbean Central Bank Agreement (Amendment), 2015 on
behalf of Anguilla. This amendment to
the Agreement would not become part of our law until an Order was signed by the
Governor incorporating it into our law as provided in the ECCB Agreement Act.[9]
The Amendment Order
[14] On 22 April
2016, Anguilla’s Governor duly signed the ECCB Agreement (Amendment of
Schedule) Order, 2016.[10] By this legislative act, the Governor, as
authorised both by our House of Assembly in the provision of section 4 of the
ECCB Agreement Act, and by the Executive Council led by Chief Minister Victor
Banks, duly brought into law the Amended Agreement signed the year before by
Chief Minister Hughes.[11]
Conclusion
[15] Anguillians
should be proud that we have finally, if belatedly, shown ourselves to be
supportive of the new regulatory standards which the international banking
community expects of our banking sector.
We were previously viewed as wild-west bankers, not subject to proper
regulation by an enabled Central Bank.
We cannot be viewed in this light any longer. We now conform to international standards. Our banking sector can stand equal with the
rest of the world.
[1]
Not Anguilla, whose membership was
still vetoed by the St Kitts Government.
[2]
Revised Statutes of Anguilla, c E5.
[3]
Section 28 of the Anguilla
Constitution Order, 1982.
[4]
The current members of the Monetary
Council are described here: http://www.eccb-centralbank.org/About/monetary.asp
[5]
Previously 25 in number.
[6]
Which I have previously detailed in
an article you can read at: http://donmitchellcbeqc.blogspot.com/search/label/Core%20Principles
[8]
I have described these 11 essential
steps in an article on my website which you can read here: http://donmitchellcbeqc.blogspot.com/2015/11/banking-reform-in-anguilla-2015.html
[9]
The Hubert Hughes administration
published the Amendment to the Agreement in February 2015 before the general
elections which brought the Victor Banks administration to power. It can be seen on the Government of Anguilla
website here: http://www.gov.ai/documents/ag/ECCBLIB-678364-v1-ECCB_Agreement_Amendment_2015_-_Final_Version.pdf
[10]
Local Statutory Instrument No 20/2016.
[11]
What is not clear is what motivated
then-Chief Minister Hubert Hughes to attempt to pass the very same amendment to
the Agreement into law on 25 October 2013 using the incorrect procedure of
rushing an Amendment Act through the House of Assembly with all three
readings taking place on the same day in the absence of the three Opposition
members and the Ex-officio members of the House. No one in Anguilla seems to know if the Governor
ever contributed to the debacle by assenting to the Act. The story is related in The Anguillian
Newspaper here: http://theanguillian.com/2013/11/opposition-asks-governor-not-to-sign-acts-says-house-sat-without-a-quorum/
The level of incompetence demonstrated
by the then Attorney-General’s chambers in drafting and approving this law and
procedure is nothing short of astonishing.
