We were shocked to hear Opposition Leader Myron Walwyn claim convincingly last week that the government deposited more than $5 million in Bank of Asia (BVI) Limited at a time when the bank was clearly in trouble.
Mr. Walwyn is right to urge Governor Daniel Pruce to launch an independent investigation into the matter, and Mr. Pruce should comply straightaway.
In the meantime, the government and financial regulators must step up efforts to answer the public’s questions.
Any bank failure is a big deal, but one can be catastrophic in a financial services jurisdiction like the Virgin Islands. Besides the damage to depositors — who in this case appear to include unwitting VI taxpayers — a bank failure could tarnish the territory’s global reputation in a way that could devastate the economy.
Transparency is the only way forward.
But public officials have been tight-lipped since the surprise announcement on May 29 that the VI Deposit Insurance Corporation had started winding down the bank with the support of the Financial Services Commission.
In their initial statement, the two regulators said little beyond providing the facts of the winding-down and their reassurances that the territory’s banking sector remains stable. A follow-up list of “frequently asked questions” explained that the VIDIC protects deposits up to $100,000 — and hinted that anyone with larger deposits in the bank may be out of luck if the money has dried up.
The government has said even less. It took a question from Mr. Walwyn in the House of Assembly on June 3 for Premier Natalio “Sowande” Wheatley to acknowledge that the government had deposited more than $5 million in the bank.
But Mr. Wheatley has stayed tight-lipped on the details even while denying responsibility for the deposit. Meanwhile, the bank itself has stayed eerily quiet.
Moving forward, many questions must be answered.
Perhaps most importantly, what will become of the $5 million the government deposited in the bank? Who decided to make the deposit, and why? Was it a bailout to help the bank through the legal troubles of its stakeholders? If so, who stood to benefit?
More broadly, how could the situation at the bank have been allowed to reach such a crisis stage? Did regulators ever step in earlier during the years when key bank stakeholders were in litigation?
Did the FSC in particular fulfil its obligations in this regard? Is the FSC now conducting an internal investigation of its own handling of the bank? If so, who is carrying it out, and under what statutory framework?
Did the bank itself fall short of fulfilling all its obligations over the years as suggested by Mr. Walwyn? If not, did the FSC take any related action?
Why did it take the VIDIC, which began operations only last June, to crack down on the bank? Is it true that the VIDIC CEO has now tendered her resignation, as one media outlet has reported? If so, who is heading the agency, and how will that affect the winding-down of the bank?
Did any elected officials or their family members have a stake in the bank? Did any of them benefit from it in any other capacity?
Were any local depositors affected besides the government? Does the VIDIC have enough funds to cover its payout obligations given that it was formed only last year? If not, are taxpayers on the hook for that money too?
Such questions are only the tip of a very large iceberg, and they must be answered as soon as possible.
To that end, we were glad to hear the premier say that he has ordered an internal audit. But that is not enough. As Mr. Walwyn noted last week, internal audits typically aren’t made public.
In addition to the audit, then, a comprehensive independent investigation must be carried out and made public as quickly as possible.
In the meantime, the premier and regulators alike must provide regular updates and answer basic questions.
Ultimately, regulators and the government must work closely together to help the public understand what went wrong at the Bank of Asia. Taxpayers surely deserve answers, and the territory’s global reputation as a financial services jurisdiction hangs in the balance.
Officials’ handling of the matter now could have far-reaching consequences for decades to come.
