Why does the new Eastern Caribbean Currency Union Banking Act give our Central Bank such apparently dictatorial powers?
 Anguilla’s present Banking Act is a uniform Act, almost identical to the other Banking Acts across the Eastern Caribbean dollar (EC$) region. Or, it used to be. All of the six independent States have in recent months replaced the old Act with the new Banking Act. Only Anguilla and Montserrat have failed to enact it. The governments of these two islands face stiff opposition from certain members of the public, based mainly on what these objectors describe as the dictatorial powers proposed to be given to the Central Bank. This opposition has been holding up the passage of this essential piece of legislation for some six months.
 The details of the so-called dictatorial powers, and the various reasons given for objection, are not important for this analysis. What is important is an understanding of why any new Central Bank powers are being introduced. Why is there any need for a new Banking Act? Is the Central Bank power-hungry, and determined to get its way at the cost of our banking system, as the opponents of the new Act allege? Or, is the Central Bank merely complying with standards that are required internationally? A little study and research reveals the answer.
 The new Banking Act is based on the Basel Committee on Banking Supervision’s Core Principles for Effective Banking Supervision, issued in September 2012. The Core Principles are in fact the minimum standards applied to judge how sound are the prudential regulation and supervision of banks and banking systems in all the regions of the world. They are the benchmark for testing the quality of supervisory banking systems. The Core Principles are used by the International Monetary Fund and the World Bank to assess the effectiveness of supervisory systems and practices all around the world.
 There are 29 Core Principles. They are divided into two areas. Principles 1-13 deal with the supervisory powers, responsibilities and functions of central banks. Principles 14-29 deal with the expectations of banks, emphasising the importance of good corporate governance, risk management, and compliance with supervisory standards. You can read them for yourself, by following the link I have provided in the paragraph above.
 I summarise the 29 Core Principles this way:
Supervisory Powers, Responsibilities and Functions
Principle 1 – Powers: There must be a suitable legal framework for banking supervision. The Central Bank must be empowered to license banks, conduct ongoing supervision, address compliance with laws, and take timely corrective action to address safety and soundness concerns.
Principle 2 – Independence and legal protection: The Central Bank must possess independence and autonomy. The legal framework for banking supervision must include legal protection. That is, the law must provide protection to the Central Bank and its staff against lawsuits for actions taken, or omissions made, while discharging their duties in good faith.
Principle 3 – Cooperation: The Central Bank must be empowered to collaborate with domestic authorities and with foreign supervisors.
Principle 4 – Permissible activities: The permissible activities of licensed banks must be clearly defined in law.
Principle 5 – Licensing criteria: The Central Bank must have the power to set criteria and be able to reject applications for banking licenses where the criterial are not met.
Principle 6 – Transfer of ownership: The Central Bank must have the power to impose conditions on any proposal to transfer significant ownership of banks.
Principle 7 – Major acquisitions: The Central Bank must have power to approve or reject major investments by a bank.
Principle 8 – Supervisory approach: The Central Bank must have power to assess the risk profile of banks and to take action to resolve banks in an orderly manner if they become non-viable.
Principle 9 – Supervisory techniques and tools: The Central Bank must be given a range of techniques and tools to effect its supervisory function.
Principle 10 – Reporting: The Central Bank must collect and analyse prudential reports from banks and be able to verify those reports.
Principle 11 – Corrective powers: The Central Bank must have the power to address unsafe practices and must possess a range of supervisory tools to make timely corrections.
Principle 12 – Supervision: The Central Bank must monitor and apply prudential standards to all aspect of the business conducted by a bank.
Principle 13 – Home relationships: The Central Bank must be able to share information it holds on a foreign bank with the foreign bank’s home supervisor.
Prudential Regulations and Requirements
Principle 14 – Corporate governance: The Central Bank must ensure that banks have robust corporate governance policies and processes.
Principle 15 – Risk management process: The Central Bank must ensure that banks have an effective Board and senior management oversight able to identify and control all material risks on a timely basis.
Principle 16 – Capital adequacy: The Central Bank must ensure banks maintain adequate capital in the context of the market in which they operate.
Principle 17 – Credit risk: The Central Bank must ensure banks adequately manage credit risk.
Principle 18 – Problem assets: The Central Bank must ensure banks have adequate processes for early identification and management of problem assets and the maintenance of adequate provisions and reserves.
Principle 19 – Concentration risk: The Central Bank must ensure banks have adequate policies and processes to deal with concentrations of risk in a timely basis.
Principle 20 – Related parties: The Central Bank must prevent abuse in transactions with related parties and ensure banks take appropriate steps to control the risk of dealings with related parties.
Principle 21 – Country risk: The Central Bank must ensure that banks have adequate polices and processes to deal with country risk and transfer risk in international activities.
Principle 22 – Market risk: The Central Bank must be able to ensure banks have an adequate market risk management process.
Principle 23 – Interest rate risk: The Central Bank must ensure banks have adequate systems to deal with interest rate risk on a timely basis.
Principle 24 – Liquidity risk: The Central Bank must be able to set prudent and appropriate liquidity requirements for banks, and ensure that banks have a strategy for prudent management of liquidity risk and compliance with liquidity requirements.
Principle 25 – Operational risk: The Central Bank must ensure that banks have an adequate operational risk management framework.
Principle 26 – Internal control and audit: The Central Bank must ensure banks have adequate internal control frameworks including independent internal audit and compliance.
Principle 27 – Financial reporting and external audit: The Central Bank must ensure banks maintain adequate and reliable records and comply with accounting practices that are internationally recognised, and annually publish their accounts bearing the certificate of an independent external auditor.
Principle 28 – Disclosure and transparency: The Central bank must ensure banks regularly publish information that fairly reflects their financial condition, performance, risk exposures, risk management strategies, and corporate governance policies and processes.
Principle 29 – Abuse of financial services: The Central Bank must ensure that banks have strict customer due diligence rules and policies and processes that prevent banks from being used for criminal activities.
 In addition to the Core Principles, the Report deals with the related issues of the need for:
sound macroeconomic policies of governments;
a modern system of business laws, including corporate, bankruptcy, contract, consumer protection, and private property laws;
an efficient and independent judiciary;
comprehensive and well defined accounting principles;
a system of independent external audits;
the availability of competent accountants, auditors, and lawyers working to high technical and ethical standards and enforced by official or professional bodies consistent with international standards and subject to appropriate oversight; and
credit bureaus to make credit information on borrowers available;
as well as a number of other relevant issues that are not relevant to this study.
 Anyone who has ever done business in Anguilla knows how lax our professional standards generally are. The only professions and trades that are legally regulated are food handlers, liquor licence retailers, land surveyors, physicians, and lawyers. All others operate on a caveat emptor basis. Anyone may call himself an architect, engineer, land valuer, real estate agent, auctioneer, accountant, or banker. None of these is subject to any form of professional licensing or regulation.
 Since we in Anguilla do not seem capable of or interested in correcting our professional and ethical deficiencies, it is hardly surprising that external agencies will force internationally recognised standards on us.
 In any event, as we have seen above, so far as banking is concerned, it is clear that the Governor of the Central Bank is not unilaterally imposing anything on us. The Governor of the Central Bank is merely demanding that Anguilla live up to the standards the Monetary Council, or Board of Directors, of the Central Bank, has mandated the Central Bank to impose and enforce. Only Anguilla and Montserrat seem intent on holding on to the old, inadequate, and no longer acceptable banking standards.
 Put another way, far from being arbitrary and dictatorial in insisting on our passing the new Banking Act, the Central Bank is trying to reassure the international banking community that Anguilla complies with the minimum banking standards expected of us. It is at the same time trying to persuade the international community that it, as our Central Bank, is meeting the high standards expected of a regional banking supervisor. Our resistance to passing the Bill is stymieing the Central Bank’s efforts on both counts. The question is, will we in Anguilla succeed in remaining a pariah banking community, while at the same time making our Central Bank appear to be an ineffective regional regulator? This is a result that we should strive to avoid at all costs.
 In conclusion, the new Banking Act is designed by its drafters to make our Central Bank and its member banks compliant with international standards. There is no evidence it is an irresponsible and unreasonable new law, drafted by power-hungry lawyers and bankers in the Central Bank, as is being suggested by some of the objectors to it.
 Chapter B010 of the 2010 Revised Edition of the Laws of Anguilla.
 At pages 22-24.