SHOULD THE GOVERNMENT OF BARBADOS SEEK TO REPURCHASE THE BARBADOS NATIONAL BANK? A CASE STUDY ANALYSIS

Author(s): GROSVENOR, PETER; HIPPOLYTE, ROMMELL; (2011)

Created 25 Jul, 2011
Categories Working Papers
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Since the CLICO Crisis commenced in 2009, speculation began concerning CLICO’s 55 per cent majority shareholding of Republic Bank of Trinidad & Tobago Ltd (RBL), which in turn controls 65.13 per cent of the shares of the Barbados National Bank (BNB). This speculation led to popular debate about the possibility, cost, benefits and other implications of the Government of Barbados repurchasing BNB. This paper seeks to provide an objective assessment of the implications of the Government of Barbados repurchasing the BNB, through cost/benefit and performance analysis. It has significant implications for other government owned institutions with socio-economic, financial and developmental mandates. The literature suggests that although the promotion of public policy can be enhanced if banks are publicly owned, there is a significant chance that this will also lead to corruption and government interference. These actions typically lead to inefficiencies and poor performance. The history of BNB shows that following its initial struggle it actually became profitable before it was sold to RBL, suggesting that success as a Government-owned entity may be possible.

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