Bramer Bank’s customers money is safe; says finance minister on Ponzi scheme
Bramer Bank’s customers will be able to retrieve money from the bank’s ATMs across the island by using their debit cards, only as from the afternoon on Saturday 4th April 2015, and as for employees of the bank, their posts are safe; however, all executives will be out, announced Mauritius’ Finance Minister. (Image: ION News)
At a press conference held Friday, 03 April 2015, Mauritius Finance Minister Vishnu Lutchmeenaraidoo gave formal assurance to customers of the Bramer Banking Corporation Ltd (BBCL) that their money is safe.
The events leading upto the revocation of the local banking major’s licence began 5 days ago when the liquidity position of BBCL continued in the red and the Bank of Mauritius (BoM) requested the bank to increase its cash reserves by Rs 350 million and a grace period of up to 31 March was provided. However, the bank was unable to abide by even the lenient measures requested by the central bank, and therefore BoM had to intervene urgently by revoking BBCL’s licence.
Therefore, there was risk of bankruptcy due to the severe liquidity issues plaguing the bank, and this liquidity problem would have spilled over onto the parent BAI group as well. It was feared that this would lead to a domino effect on the fortunes of the entire BAI group, hitherto a well respected conglomerate dealing in a wide range of financial services across the island economy.
The government had to consider public interest given the alarming situation which is a Ponzi scheme upward of Rs 25 billion. This amount is exclusive of investors who have placed funds in the one-time endowment policy involving a sum of Rs 22 billion, which was a fund that scammed investors by promising that those who placed their money with BAI under this policy would get huge returns on their investment.
The finance minister gave his word that not one of the 30,000 plus customers of BBCL will lose a penny, which provided the much-needed assurance to customers that they will get their money back. Upon the revocation of BBCL’s license, customers did not know what would happen to them, creating panic and frustration among the bank’s clients in Mauritius.
“It is a national crisis,” underlined Vishnu Lutchmeenaraidoo, and added that steps were being taken to contain this crisis. For customers to get access to their funds, the State Bank of Mauritius Ltd (SBM) will take control of the situation, and a special meeting of the SBM board of directors will be held to endorse this decision.
Bramer Bank’s customers will be able to retrieve money from the bank’s ATMs across the island by using their debit cards, only as from the afternoon on Saturday 4th April 2015, and as for employees of the bank, their posts are safe; however, all executives will be out, announced Mauritius’ Finance Minister.
This precarious financial situation is also of concern with respect to the BAI Co Ltd which is a big conglomerate in Mauritius comprising around 80 companies. The government of Mauritius has declared the BAI a Ponzi scheme that is comparable to the Bernard Madoff Ponzi scheme that hit the US in December 2008.
The situation is compounded by the complicity of BAI insurance, wherein the government’s aim is to protect policy holders. The Financial Services Commission (FSC), as the regulatory authority for non-banking financial services across Mauritius, has appointed two receivers — namely André Bonieux and Mushtaq Oosman from the PwC — and BAI executives are prohibited from leaving the country at any cost.
The minister highlighted that if purely procedure were followed, the sheer panic caused by the scam would have been vastly detrimental to Mauritian society, and also volunteered the information that the government has Rs 2.3 billion while the SICOM holds Rs 800 million of funds at the BBCL.
On Monday, the government authorities will hold a discussion with the executives responsible for perpetrating this major Ponzi scheme, immaterial of whether they are in Mauritius in abroad.
“We shall make every effort to protect policyholders,” declared André Bonieux, Senior Partner, PwC, at the end of the press conference.
He noted that BAI management certainly shows itself cooperative with the proceedings. There was, moreover, a first meeting after FSC’s announcement of PwC being appointed as receivers, and another meeting is in the pipeline.
André Bonieux highlighted that the case of BAI is more complex than that of Bramer Bank, because of the sheer size of the conglomerate. It counts around 80 companies in its fold, with numerous investments across companies in the island including Iframac, Courts and “a hospital.” Consequently until this situation is resolved, it will be “business as usual” for BAI from Monday, announced Bonieux. As for shareholders, nothing has been announced as yet, and shares of Bramer Bank continue to be on freeze.
The Bank of Mauritius has opened a hotline for customers of Bramer Bank at 202.38.02.
- By Wazna Gunga