Antigua will not give approval for Scotiabank sale – PM Browne

Nov 29, 2018 News

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The shock announcement that Canadian-owned Scotiabank has signed agreements with Republic Bank, for the latter to buy nine of its operations in the Caribbean, is not going down well.

One day after the Government of Guyana warned about the implications, the Prime Minister of Antigua and Barbuda, Gaston Browne, has advised the Eastern Caribbean Central Bank (ECCB) that his government will not be issuing a vesting order to facilitate the Bank of Nova Scotia’s divestment of its Antigua holdings, as there was no consultation.
The Prime Minister yesterday wrote to Timothy Antoine, the Governor of the ECCB, the entity which has regulatory responsibility for banks operating in Antigua and Barbuda’s banks.
In the letter, Prime Minister Browne told the ECCB Governor that, “At no stage was the Government of Antigua and Barbuda consulted by the Bank of Nova Scotia nor was its agreement sought in this matter. The people of Antigua and Barbuda, including many persons holding deposits and other investment instruments with the Bank, learned of this divestment scheme through a media release.”
He said that the matter has implications for the integrity of the banking system in Antigua and Barbuda and, indeed, for the stability of the Eastern Caribbean Currency.
The PM made it clear that “the Government of Antigua and Barbuda has concluded that the divestment announced by the Bank of Nova Scotia is not in the overall interest of our country and our people”.
Copying his letter to colleague Heads of Government of ECCB member countries, some of which are similarly affected, the Antigua and Barbuda Prime Minister advised the Central Bank Governor that “until other options for divestment are explored, particularly providing a consortium of local banks the right of first refusal to acquire the Antigua and Barbuda operations, the Government of Antigua and Barbuda will not issue a vesting order”.

FORMAL APPLICATION
The letter came hours after the PM wrote Suzan Snaggs-Wilson, the General Manager of Scotiabank in Antigua.
The PM’s office said that the Bank of Nova Scotia has been stopped from proceeding with any sale of its operations in Antigua and Barbuda until application is made to the Government and approval given.
“Antigua and Barbuda Prime Minister Gaston Browne also wants assurances that local banks will be given priority to purchase the Scotiabank’s operations in Antigua, and that local persons’ investments and saving will be protected,” a statement from the PM’s office indicated.
Browne lamented the fact 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”.
In his letter, the Prime Minister declared, “I hereby inform 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”.
Prime Minister Browne stated 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”.

CAUGHT BY SURPRISE
The announcement by Scotiabank not only caught the Government of Guyana by surprise but also scores of staffers who were reportedly told hours before. A number of them learnt of it from the news.
There is deep worry about their future with Scotiabank, which boasts five locations in Guyana.
The Canadian bank has been here for 50 years – since 1968.
Scotiabank announced Tuesday that the owners of Trinidad-owned Republic Bank are to take over its local operations. It disclosed 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’).
Scotiabank insisted that the agreements are subject to regulatory approval and customary closing conditions.
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 says.
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.

51 % CONTROL
The Finance Ministry of Guyana, hours after the announcement, noted that the move by Scotiabank is not Guyana-specific and is part of a region-wide refocusing by the bank.
“The Ministry of Finance notes the statement by Republic Bank that the agreement is “subject to all regulatory approvals”
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.
According to the Ministry, “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 said, 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.
With Guyana about to enter into oil production, the sale has been perplexing to all and sundry.
At stake are the millions of dollars of foreign currency that will be at stake in Guyana.
The Ministry itself was puzzled and made this known Tuesday.
“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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