Eastern Caribbean Central Bank

• Author: Duke Pollard
• Profession: Sitting senior judge of the Caribbean Court of Justice (CCJ), the highest appellate municipal court of the Caribbean Community (CARICOM)
• Pages: 404-434

404 THE CARICOM SYSTEM

21

THE EASTERN CARIBBEAN CENTRAL BANK

As part of a programme to put the fragile economies of the dependent Commonwealth

Caribbean countries on a stable, sustainable economic footing, the West Indies

(Associated States) Council of Ministers was established in 1966 to further regional

cooperation in economic and other areas. This was followed in 1968 by the conclusion

of the Agreement Establishing the East Caribbean Common Market which was fashioned

on the Dickenson Bay Agreement of 1965 establishing the Caribbean Free Trade

Association. In 1981, the Treaty Establishing the Organisation of Eastern Caribbean

States was signed and this organisation absorbed the East Caribbean Common Market

whose stated principles were the coordination of currency and financial policies. Indeed,

one of the functions of the Organisation of Eastern Caribbean States (OECS) was to

coordinate, harmonise and pursue joint policies, particularly as they related to currency

and central banking. In this context it is important to note that for a considerable

period prior to the establishment of the OECS there had been a significant degree of

currency and financial policy harmonisation among this group of political entities with

the establishment of the Eastern Caribbean Currency Authority created under the East

Caribbean Currency Agreement of 1965. The East Caribbean Currency Authority was

succeeded by the Eastern Caribbean Central Bank in 1983 which acquired the assets of

the former and assumed its rights and liabilities.

The management of the Bank is controlled by the Monetary Council which is the

highest decision-making body. The Council consists of one Minister each appointed

by the Participating Governments and each Minister so appointed is required to designate

an alternate to serve in his stead on the Council in his absence. Decisions of the Council

are required to be communicated to the Bank in writing and are binding on the Bank

while they remain in effect. The powers of the Bank are vested in the Board of Directors

which, subject to the authority of the Monetary Council, is tasked with the policy and

general administration of the Bank. The Board consists of nine Directors, including

the Governor of the Bank, the Deputy Governor and one Director appointed by each

Participating Government. The Governor has power to act, contract and sign instruments

and documents on behalf of the Bank.

The monetary unit of the Participating Governments is the Eastern Caribbean dollar

divided into one hundred cents with such external value as may be declared from time

to time by the Bank. The Bank is required, on a unanimous recommendation of the

Board of Governors and approved by a unanimous decision of the Monetary Council,

to declare the external value of the Eastern Caribbean dollar, subject to any obligations

assumed by a Participating Government in accordance with the provisions of the Articles

The Eastern Caribbean Central Bank 405

of Agreement of the International Monetary Fund and any external value for the East

Caribbean dollar which might have been fixed by the predecessor East Caribbean

Currency Authority and remains in force. Participating Governments adversely affected

by a change in currency values are entitled to compensation on an agreed basis. The

Bank has the sole right to issue currency notes and coins in the jurisdictions of

participating Governments and both shall be legal tender in accordance with the

applicable provisions of the Agreement Establishing the OECS.

The Bank is required to establish and maintain an external reserve in an amount

not less than 60 per cent of the value of currency issued or deemed to be issued by the

Bank and in circulation together with other demand liabilities. Such an external reserve

should consist of all or any of the following, that is, gold, foreign exchange in the form

of currency or bank balances held abroad, any internationally recognised reserve assets,

bills of exchange or promissory notes denominated in foreign currency and payable

outside the territories of Participating Governments and treasury bills issued by foreign

governments. The Bank is also the depository of the external assets of Participating

Governments and may buy, sell or deal in gold or bullion or foreign exchange, open and

maintain accounts abroad and from time to time determine the rates at which it buys,

sells or deals in gold and foreign currencies. The Bank may also open accounts for and

accept deposits for financial institutions conducting business in the Participating

Governments on such terms and conditions it may determine.

Subject to the approval of the Monetary Council, the Bank may administer or

participate in schemes for the purpose of issuing bank deposits, providing export credit

insurance and guarantees and providing guarantees for credit extended by financial

institutions. Subject to the Agreement, the Bank may with the approval of the Monetary

Council, subscribe to, hold or sell shares of corporations organised with the approval or

under the Authority of Participating Governments for any of the purposes specified

above. The Bank enjoys in the territories of Participating Governments privileges and

immunities required for it to perform its functions, including for its property and assets

immunity from every form of judicial process unless it waives such immunity. Similarly,

to the extent necessary to carry out the provisions of the Agreement, the property and

assets of the Bank are free from restrictions, regulations, controls and moratoria of any

nature. The Bank, its property, assets, income and business are immune from taxation

and customs duties in respect of goods acquired by, or services rendered to it for its own

use. Similarly, the salaries and emoluments of the Governor, Deputy Governor, Directors

and officials of the Bank are exempt from taxation.

Participating Governments may withdraw from the Bank after written notice in

that behalf simultaneously to the Chairman of the Monetary Council and to the Bank

and subject to all direct and contingent obligations to the Bank incurred up to the date

of withdrawal. The Monetary Council may by a resolution adopted by two-thirds of the

members terminate the operation of the Bank.