Both Sides of The Coin: The Story of The Central Bank of Barbados 1972-2017

180 managing director to the Bank’s general manager in November 1982, were the provision of financial services to manufacturing, tourism and agriculture. On April 8, 1983, TCL was designated a financial institution by the minister of finance on the recommendation of the Bank. This enabled the Bank to carry out periodic inspections of its operations. When TCL started operations early in April 1983, very little share capital had been subscribed and consequently, the company embarked on an intensive promotional campaign to attract cash deposits. This sales pitch was anchored on a promise to pay higher interest rates than obtained at the commercial banks. The campaign was very successful and by the end of August 1983, total deposits were $4.7 million, compared to only $538,502 in share capital. The Bank undertook three inspections of TCL: on May 31, 1984, November 30, 1984 and April 30, 1986. The inspections revealed, inter alia , a volatile and narrow deposit base, a very high loan to deposit ratio, a high number of sub-standard loans, poor record-keeping and breaches of the Rate of Interest Act, theHire Purchase Act and the Exchange Control Act. After each inspection, Governor Blackman wrote to TCL’s managing director pointing out the weaknesses in the operation and recommending corrective actions. In the body of their report, the commissioners accused the Bank of failing to use the powers it had under Section 36 (2) of the Central Bank Act to prevent TCL’s collapse. However, in their conclusions, they blamed the collapse on inefficient management and undercapitalisation. They recommended the introduction of a new Act to protect depositors in non- bank deposit-taking financial institutions. This episode was embarrassing to the Bank, since questions were raised about its commitment to ensuring financial stability. However, the truth was that since TCL was not registered under the Banking Act the Bank had no jurisdiction over the entity and therefore no powers that would have prevented its collapse. The Trade Confirmers case was one of the reasons for the introduction of the Financial Intermediaries Regulatory Act of 1992, which brought deposit-taking companies under the Bank’s supervision.