No doom and gloom exist in banking sector …Jordan highlights glowing performance of other banks …Says Govt. knew since April of Baroda’s intention to exit market

Dec 08, 2018 News

By Kiana Wilburg

Contrary to the views of the political opposition, Finance Minister, Winston Jordan, made it pellucid during his wrap up of the 2019 budget debates that Bank of Baroda’s decision to sell its operations here is no indication that the nation’s banking sector or its economy as a whole, is in trouble.
Minister Jordan told the National Assembly last night that since April, the government was aware of Bank of Baroda’s decision. He stressed that it did not come as a surprise to the government or industry regulators when it was officially announced two days ago that the India-led bank wanted to cut its losses.
The Finance Minister said , “We knew of this since April and it was signaled to us since then that they were going to do that. We tried to persuade them that doing business here is good but alas, the local office wasn’t able to persuade the headquarters (in India). In fact, I understand that the people at the local office didn’t know of the decision…”

Finance Minister, Winston Jordan

Jordan added, “It is important to understand that this is happening generally around the world. These banks consider doing business in these states is not profitable anymore, because the risks have increased dramatically. They have to conform with a number of regulations relating to anti-money laundering and countering the financing of terrorism…”
The Finance Minister said that the Indian Bank is not only selling off its operations in Guyana, but it has also done so in Trinidad and New Zealand.
The Minister said, “This is a fact of life. Scotia Bank is the same thing; they are not only pulling out on operations here but in other territories…What we have to do is see what opportunities exist in these challenges…”
Jordan noted that Guyana is poised to receive a tremendous amount of wealth from its oil sector. On that note he said, “Let’s be blunt, with five billion and counting barrels of oil, who is pulling out and for what reason? Who is not willing to take a risk with five billion barrels of oil?”
The Minister then proceeded to note the performance of other financial institutions within the banking sector as proof that the picture of ‘doom and gloom’ is nothing but a delusion.
Referencing some of the headlines in the daily newspapers, Jordan noted that Republic Bank’s profits are up by 14.4 percent for 2018, Demerara Bank recorded $2B in profits and Citizens Bank recorded a 51.6 percent increase in after tax profits.
With this in mind, the Finance Minister said that comments which suggest that Guyana’s banking sector and the economy at large are in trouble can only be seen as wicked.

SCOTIA’S MOVE TO SELL
It was only a few weeks ago that Republic Bank announced that it has entered into an agreement to acquire Scotiabank’s banking operations in Guyana, St. Maarten and the Eastern Caribbean territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
Republic Bank said that the agreement signaled the commencement of a transaction that is subject to all regulatory and other customary approvals and conditions.
Ronald Harford, Chairman of Republic Bank said, “This acquisition represents another major milestone for the Republic Group. As we grow and acquire significant positions in our existing markets, it is important that we continue to broaden our footprint, regionally and internationally.
“This agreement, which is subject to all regulatory approvals, affords us the opportunity to reach more clients in the Eastern Caribbean and Guyana, two markets we are familiar with, and build new relationships in St. Maarten…”
The Republic Group’s total asset base as at September 30, 2018 stood at US$10.5 billion, with equity at US$ 1.5 billion and profits attributable to shareholders for the year ended September 30, 2018 of US$ 198 million. The acquisition of Scotia’s operations will increase the Group’s asset size by approximately US$2.5 billion.

REGULATORS WORRIED
Since the aforementioned announcement, Central Bank regulators have expressed great worry about the troubling ramifications this move could have, should approval be granted.
In fact, Kaieteur News was informed by several Central Bank officials that Republic Bank has not submitted an application for approval regarding its move to acquire Scotia’s operations here. Republic Bank only issued the Central Bank with a letter which highlights that its Board has approved of the acquisition of Scotia in the Caribbean and Guyana.
Contacted for a comment on the matter, Central Bank Governor, Dr. Gobind Ganga said that when Republic Bank makes its application, several processes will have to be implemented to ensure that the financial institution abides by the requirements and criteria set out in the Financial Institutions Act.
Dr. Ganga told Kaieteur News, “In addition to that, we will be looking to see to what extent this move by Republic Bank would interfere with fair competition in the banking sector. We will be looking at whether or not Republic Bank has the wherewithal because they are now acquiring a larger share of the banking system not only in Guyana but elsewhere… Remember, they would becoming too big, they would be acquiring control of a little more than half of the banking sector…”
The Governor added, “And so we have to check for wherewithal. You can’t have a bank that doesn’t have the wherewithal to resist any situation that may arise (acquiring such a large share of the market)…One would have to check on their ability with capital and other things like management in terms of the governance that is required in this field.
“We have to look clearly at the implications of this acquisition from all sides.”
Dr. Ganga said that the Central Bank will have to examine this matter from a prudential basis. He said that everything will be done to ensure that Guyana’s banking sector remains strong, sound and profitable. Further to this, the Central Bank head said that he will be engaging his counterparts in the other regions which Republic Bank would be acquiring the banking assets of Scotia Bank.
He said, “This is a big move so we have to be extremely careful.”