Local regulator refuses approval for Republic Bank’s takeover of Scotiabank's operations

Local regulator refuses approval for Republic Bank’s takeover of Scotiabank’s operations

Sep 25, 2019 News

Bank of Guyana has refused to approve Republic Bank’s takeover of Scotiabank’s operations.

Republic Bank’s New Market Street Headquarters

Scotiabank’s Carmichael Street Headquarters

Central Bank Governor, Gobind Ganga

Governor of Central Bank, Dr. Gobind Ganga, told Kaieteur News that the two banks were notified of the decision yesterday, via letters.
Scotiabank had, last year, resolved to sell out its assets in several Caribbean countries, including Anguilla, Antigua and Barbuda, Dominica, Grenada, Guyana, St. Kitts and Nevis, St. Lucia, St. Maarten, and St. Vincent and the Grenadines, with most of those granting approval.
The move, according to Scotiabank, is in-keeping with its strategy of focusing on its core markets with significant scale.
The holders of the Trinidadian Republic Financial Holdings Limited had intended to take control of the Canadian banking institution after decades of that banking institution operating in Guyana.
Central Bank, in making its decision, took the matter through a thorough due diligence process. Central Bank executives had, last year, noted the concerns raised by several sections of society and committed to determining the extent to which the move would interfere with fair competition in the banking sector.
Kaieteur News understands that the decision to refuse approval also took into consideration whether Republic Bank has the wherewithal to acquire such a large share of the banking system, examining the matter from a prudential basis.
Ganga had assured that everything would be done to ensure that Guyana’s banking sector remains strong, sound and profitable, including engagements with his counterparts in the other territories where Republic Bank would be acquiring the banking assets of Scotiabank.
The announcement, made in November of last year, had garnered widespread criticism from several sections of the public, including the Opposition.
Opposition Leader Bharrat Jagdeo had said that the regulator shouldn’t grant approval as it “could very well be illegal”.
Mainly, it was contended that because Republic Bank currently holds 35.4% of the local banking systems assets and 36.8% of deposits, the acquisition taking both up to 51% would put the financial system at risk. It was also contended that this would interfere with the ability of other financial institutions to compete.
Government had also responded to the announcement with a warning that it would have to assess the implications of such a sale. Government noted similar concerns as the Opposition, the influence the sale would have had on pricing of banking products and rates, and the timing of the decision before First Oil.