ST. JOHN’S, Antigua and Barbuda, November 27, 2018 (CMC) – Two Caribbean Community (CARICOM) governments, yesterday, expressed some unease at the announcement that the Canadian-based Bank of Nova Scotia (Scotiabank) had agreed to sell its operations in nine Caribbean countries to a Trinidad-based financial institution.
The Antigua and Barbuda government said it was “deeply disappointed” that the Bank of Nova Scotia would decide to sell its operations, here, “without any form of consultation with the regulators or the Finance Minister”.
The Guyana government said the agreement “raises a number of issues for the banking sector in Guyana and for the public, which the Ministry of Finance, the Bank of Guyana and the government of Guyana will need to carefully consider”.
The Trinidad-based Republic Financial Holdings Limited (RFHL) said it had entered into an agreement to acquire Scotiabank’s banking operations in nine Caribbean countries.
A RFHL statement said that the banks being acquired are located in Guyana, St. Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
It said that the purchase price is US$123 million, which represents US$25 million consideration for total shareholding of Scotiabank Anguilla Limited; and a premium of US$98 million over net asset value for operations in the remaining eight countries.
But in a letter sent to Suzan Snaggs-Wilson, Scotiabank General Manager here, Prime Minister Gaston Browne said that he was “deeply disappointed’ at the manner in which the sale had gone through.
“On behalf of my government, I advise that I am deeply disappointed that the authorities of the Bank of Nova Scotia would decide to sell its operations in Antigua and Barbuda, without any form of consultation with the regulators or the Finance Minister, whose agreement and authority for such a sale are required, by law.
“I am further deeply concerned that the Bank of Nova Scotia would spring such an important decision on the people of Antigua and Barbuda, particularly its many clients, who have displayed great loyalty to the bank for almost 50 years, providing it with significant profits,” Browne wrote.
He said that he was now informing the authorities of the Bank of Nova Scotia “that their decision to sell the operations in Antigua and Barbuda, without the requisite consultation and agreement of the regulators and the government of Antigua and Barbuda, is unacceptable.
“Should the Bank of Nova Scotia wish to divest its operations in Antigua and Barbuda, it would be necessary to seek the government’s approval. In this connection, my government would strongly commend that such divestment should be offered first to local banks as the priority.
“Indeed, I am aware that, notwithstanding the unexpectedness of Bank of Nova Scoria’s announcement, a consortium of such banks has already expressed an affirmative interest to acquire (its operations here),” he said.
Browne said that his government now expects “a formal application by the authorities of the Bank of Nova Scotia for the terms of any divestment, including a reasonable time to identify new local owners, and assurances of the safety of the assets and investments of local clients”.
Meanwhile, the Guyana government said the agreement “raises a number of issues” and that it had taken note of the announcement of the agreement for control of Scotiabank.
The Ministry of Finance, in a statement, said that “this move is not Guyana-specific and is part of a region-wide refocussing by Scotiabank”, and that it has also taken note of the statement by RFHL that the agreement is “subject to all regulatory approvals”.
The statement said that the Financial Institutions Act (FIA) has clear stipulations regarding “acquisition of control” and requires approval of the Bank of Guyana, following the submission of an application and due diligence being conducted.
“Further the FIA addresses as well, the issue of “fundamental changes” as it relates to mergers and transfer of assets or liabilities. The agreement raises a number of issues for the banking sector in Guyana and for the public, which the Ministry of Finance, the Bank of Guyana and the government of Guyana will need to carefully consider,” the Ministry of Finance said.
It said these include Republic Bank currently holding 35.4 percent of the banking system’s assets and 36.8 percent of deposits, and the acquisition will up this to 51 percent of both assets and deposits.
“This raises concerns about an over-concentration of banking services, market domination and the “too big to fail’ risks”, the Ministry of Finance said, adding it will also have to take into consideration “the effect on competition and the potential for Republic Bank to have too much influence on pricing of banking products and rates”.
It said that issues, related to correspondent banking options, loss of jobs with Republic Bank likely to consolidate branches and that “the Scotiabank decision, which is made when Guyana’s economy is on the cusp of financial transformation with the onset of a massive new oil and gas sector, raises concerns and is regretted.
“The Ministry of Finance wishes to assure that it will continue to stay abreast of this matter, will act in the best interest of the Guyanese people and will issue subsequent updates as necessary.”