The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Caribbean regulator yesterday called for a uniform regional approach to overseeing financial services entities that operate in multiple jurisdictions as a way to prevent ‘regulatory arbitrage’.

J. Kevin Higgins, managing director of the Turks and Caicos Islands Financial Services Commission, said such an approach was necessary to avoid a “regulatory albatross” where companies deliberately sought to be licensed or incorporated in jurisdictions with lower regulatory standards.

Speaking during a panel discussions at a Bahamas Institute of Financial Services (BIFS) conference, he pointed to the CL Financial collapse as a prime example of the need for a regional approach to policies sand regulations, plus greater dialogue between a company’s main regulator and those in other jurisdictions.

Mr Higgins said that over the last 10-15 years there have been several institutions in the Caribbean - banks as well as insurance companies - that have become regional institutions.

“The CLICO experience was the light for many of us to show that we had to start looking at region-wide policies and regulations. No longer could we simply look at our particular national markets. It has led regulators to start thinking of region-wide regulations,” said Mr Higgins.

“The second thing is that the Basel rules require that banks operate under what is called consolidated supervision. That means that you can have a Barclays Bank operating in the Caribbea,n for instance. Not only are the Central Banks and regulators in the Caribbean responsible for Barclays, but also their home regulator, which is the Bank of England in the UK.”

Mr Higgins said a regional regulators strategic meeting sponsored by the International Monetary Fund (IMF), and set for September 21-22 in Nassau, will bring focus to a strategic plan to establish standards throughout the region.

“We are trying to get certain standards across the region so that you don’t get what is called regulatory arbitrage, which is where companies are licensed or incorporated in a particular jurisdiction because that jurisdiction has low standards or lower standards. There is an IMF meeting coming up in Nassau to deal with a strategic plan to establish standards thought out the region. That’s the big theme for us,” he said.

“Just look at the CLICO situation. We are still suffering from that. The impact of the CLICO collapse is still being felt through the eastern Caribbean, in The Bahamas and in Turks and Caicos. CLICO could have gone in one jurisdiction and done things it could not have done in another.

“In our jurisdiction we had a branch of CLICO. After the collapse we found that they had annuities they had sold to people in Suriname and Guyana on our books in Turks because we were a US dollar jurisdiction. So they made the policies in US dollars in Turks and the regulator in Turks was never aware. We have to get standards across the board otherwise we will have problems.”