To date $60 million has been paid out to former depositors of the Hindu Credit Union (HCU), Finance Minister Larry Howai said yesterday.
He was speaking in the House of Representatives on the Purchase of Certain Rights (HCU) bill in the House of Representatives. The bill allows the Finance Minister to make payments to HCU depositors (with over $75,000) in any form, including the issue of bonds.
Noting that 160,000 people were affected by the HCU collapse, Howai said the Government was seeking to treat HCU depositors in the same way as it did CLICO depositors: “The Government considers that it is its moral and constitutional duty to treat all citizens equitably and therefore feels obligated to preserve the strength of the institution and to protect depositors and investors from financial loss as a failure of regulation prior to 2008,” Howai said.
“Ordinarily in liquidation setting, shareholders are paid only after an institution’s creditors are paid in the event that there is a surplus of assets over liabilities. However, in light of the Central Bank Report it is observed that share purchase in the context of a credit union was a means of effecting savings. Therefore the Government policy in light of this information was to include shareholders as well (in the bailout),” he said.
He said in phase one all depositors who held shares $75,000 or less were paid off. Those who had depositors of over $75,000 were being dealt with, through the issue of bonds.
Howai said the bonds would be exempt from stamp duty and would have of varying maturities over one to 20 years.
“Mr Speaker, with this final act we embark on the process of bringing to a close this entire sordid affair involving the shareholders and depositors of the HCU. It will allow us to settle the obligations, perhaps not in the way we would have liked but certainly in a way that we can afford in the light of the serious regulatory failures that occurred and which allowed HCU to get to the stage at which it had arrived,” Howai said.
Howai said the Commission of Enquiry report is “anticipated shortly”.
“We will use the results of the Sir Anthony Coleman enquiry to help bolster the final amendments that are being made to the new credit union legislation which would be tabled in the not-too-distant future, after further consultation with the stakeholders,” he said. These amendments would be aimed at providing proper governance and appropriate regulation, he said.
“At this time based on the latest financial information that we have available to us, the liabilities of the HCU significantly exceeds its assets. And there is very little likelihood that the creditors and shareholders will be made good from the sale or disposal of the assets of this company,” Howai stated.
Howai said data provided by Central Bank revealed that about one-third of the population has accounts in credit unions and that credit unions accounted for $9.5 billion of deposits and shares in the financial system.