Latest update July 2nd, 2024 12:59 AM
Nov 28, 2018 News
The owners of Trinidad-owned Republic Bank is to take over the local operations of Scotiabank, ending what would have been decades of stay for that Canadian banking institution in Guyana.
However, the Government of Guyana has cautioned, warning that it has to assess the implications.
Scotiabank announced yesterday that it has entered into an agreement to sell its banking operations in nine non-core markets in the Caribbean (Anguilla, Antigua, Dominica, Grenada, Guyana, St. Kitts & Nevis, St. Lucia, St. Maarten, St. Vincent & the Grenadines) to Republic Financial Holdings Limited (‘RFHL’).
The agreement is subject to regulatory approvals and customary closing conditions.
According to its statement, Scotiabank said the agreements are part of its strategy to focus the bank’s efforts on its core markets with significant scale.
As part of this strategy, Scotiabank’s subsidiaries in Jamaica (Scotia Group Jamaica Limited, ‘Scotiabank Jamaica’) and Trinidad & Tobago (Scotiabank Trinidad & Tobago Limited, ‘Scotiabank Trinidad & Tobago’) announced that they will enter into a 20-year distribution agreement with Sagicor Financial Corporation Limited (‘Sagicor’) through which an enhanced suite of market-leading insurance products and solutions, underwritten by Sagicor, will be offered to Scotiabank customers in Jamaica and Trinidad& Tobago.
As part of this partnership, Scotiabank Jamaica and Scotiabank Trinidad & Tobago have entered into agreements to sell their respective insurance subsidiaries: Scotia Jamaica Life Insurance Company and ScotiaLife Trinidad and Tobago Limited to Sagicor.
As Canada’s most international bank, Scotiabank has been operating in Guyana since 1968, with five branches across the country.
Scotiabank insisted that the agreements are subject to regulatory approval and customary closing conditions.
“Scotiabank is proud to work with the Republic Group and Sagicor – both leaders in financial services in the Caribbean who are well positioned to invest and grow these businesses,” said Ignacio (Nacho) Deschamps, Group Head, International Banking at Scotiabank.
“Due to increasing regulatory complexity and the need for continued investment in technology to support our regulatory requirements, we made the decision to focus the bank’s efforts on those markets with significant scale in which we can make the greatest difference for our customers,” continued Mr. Deschamps.
“Scotiabank is committed to the Caribbean as demonstrated by the Bank’s ongoing investment in products, services and processes to provide an enhanced banking experience to customers across the region.’
Sagicor is a leading financial services provider in the Caribbean, with operations in 22 countries in the Caribbean, Latin America, the United Kingdom and the United States.
RFHL is a leading financial group based in Trinidad & Tobago with operations across the Caribbean and Ghana.
As part of the proposed agreements, impacted employees of Scotiabank in the nine countries will join the Republic Group and employees of Scotia Jamaica Life Insurance Company and ScotiaLife Trinidad and Tobago Limited will join Sagicor, or a new licensed insurance sales entity that will be created as a result of this transaction.
“Scotiabank is committed to working closely with RFHL and with Sagicor to provide the smoothest transition possible for all customers and employees,” the bank said in its statement.
Republic Bank has been growing in strength, with several branches in Guyana. It has been actively participating in several public/private partnerships projects, including the Berbice Bridge and Marriott Hotel.
However, the sale may not be so clear-cut for Republic Bank and Scotiabank.
According to the Ministry of Finance, it has taken note of the announcement of the agreement for control of Scotiabank by Republic Bank in nine Caribbean territories including Guyana.
“The Ministry emphasizes that this move is not Guyana-specific and is part of a region-wide refocussing by Scotiabank.
“The Ministry of Finance notes the statement by Republic Bank that the agreement is “subject to all regulatory approvals”, according to the ministry.
It explained 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.
However, the ministry warned that it will thread carefully.
“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 issues the ministry include the fact that Republic Bank currently holds 35.4% of the banking systems assets and 36.8% of deposits. The acquisition will up this to 51% of both assets and deposits.
“This raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks.”
According to the Finance Ministry, it will have to consider the effect on competition and the potential for Republic Bank to have too much influence on pricing of banking products and rates.
Also to be considered are the burning issues related to correspondent banking options.
The Finance Minister also expressed worry over the loss of jobs with Republic Bank with the likely consolidation of branches.
The ministry also questioned the timing of the decision.
“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.”
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