Republic Bank has denied the claim that it would control up to 51% of Guyana’s banking assets should its acquisition of Scotiabank’s banking operations here go ahead.
“The combined Republic and Scotia entity would not account for much more than 33% of the financial system assets in Guyana,” Michelle Palmer-Keizer, General Manager, Group Marketing and Communications, for the Trinidad and Tobago-owned Republic Bank said in response to questions from Sunday Stabroek.
“The Guyana market has always been a very competitive market and we do not see this changing following this transaction. We have noted the reference to 50% of the banking system’s assets but we believe that this underestimates the importance of the non-banking members of the financial system – such as the building societies and trust companies – who have always been strong players in the market,” Palmer-Keizer noted.
Following the announcement of Scotiabank’s sale of its Caribbean branches to the Trinidad parent of Republic Bank, the Finance Ministry said the deal raised a number of issues for the local banking sector and for the public, which the Ministry, the Bank of Guyana and government will need to carefully consider, including Republic Bank holding up to 51% of the banking system’s assets and deposits.
Palmer-Keizer stated that addressing this issue is why the company has asked to meet with the government through Minister of Finance Winston Jordan. “The objective of the meeting is to share with the Government of Guyana the benefits of the proposed transaction from Republic’s perspective and also to address the concerns expressed by the Government of Guyana,” she explained.
The bank also wants the government and the public, especially employees of Scotiabank, to know that should the deal proceed, no jobs will be lost.
“The job titles at Scotia may be different to the job titles at Republic, so one of the initial steps will be to revise titles to be consistent throughout the expanded operation. This, however, will not affect job security, seniority in the Scotia system or compensation levels,” the company’s Palmer-Keizer stated.
Days after it was announced that Scotiabank had struck a deal to sell a string of its Caribbean branches, including Guyana’s, to Republic Bank of Trinidad, the Bank of Baroda sought bids from investment bankers to carry out the sale of its Guyana-based subsidiary.
Government has said it had been notified since April of the Bank of Baroda’s scaling-down of operations worldwide.
Nonetheless, there is concern over the absence of an international bank providing commercial services here.
With oil production set to begin in 2020 by ExxonMobil and other companies set to also begin works offshore, a senior official has said that that government will be looking into the possibility of attracting some “well-known” banks here.
Jordan has said that government is also assessing the situation. He said that having a well-known foreign-owned bank here augurs well for the investment climate, particularly given that Guyana is soon to be an oil producer and its Gross Domestic Product is expected to balloon.
And while he believes that an oil and gas economy will attract investment here from banks, he has also said that the exit of Scotiabank and Baroda could serve as an opportunity for local banks to expand their operations and attract new foreign investors.
Jordan said that with the emergence of the oil and gas sector, he does not anticipate the decisions of the two banks will hurt the local economy.
“For every challenge, there is opportunity. So, there is opportunity for other banks or owners to own these banks and grow them. We are talking now about an economy that has the opportunity for five billion barrels of oil. [They can now] step up or widen their base to get new clients, new players coming into the market…you have five billion barrels of oil,” he said. “I mean think about that—American Airlines is here, now you are hearing that United Airlines want to come also and so on. It is not as if pulling out of Guyana is the end…,” he added.
Private sector bank
Meanwhile, banking officials here have confirmed that there are applications from three Trinidad and Tobago banks, for banking licences here.
In addition, the Private Sector Commission (PSC) Chairman Desmond Sears has told Sunday Stabroek that the private sector body is discussing pooling resources to open a commercial bank of its own.
“We are going to be meeting where we will look at the possibility of local private sector involvement. We were looking at [the exit of] Scotiabank but now that you have Baroda, we are going to see if we can have private sector interests. In other words, to see if we can have local participation. There are private sector interests in the banking sector, you know developing a banking operation,” he said.
“I think there is enough in the private sector in terms of cash availability. I don’t see why we can’t engage ourselves in banking. Demerara Bank did it… You might have said when Demerara Bank was starting up a lot of people were very doubtful but Dr. [Yesu] Persaud went through with it and now Demerara Bank is part of the whole financial system. There are people who got a lot of resources. I remember someone pointing out that there is enough Guyanese capital within Guyana that you don’t need to go and borrow,” he added.
Sears said that while he believes that having a foreign-owned bank here would be good for competition, it is doubtful that the PSC will go out scouting for a foreign bank to establish here.
“For me, it is always good to have competition and maybe that is what is required—some competition in the private sector. It is a pity that Scotiabank is pulling out at this time when Guyana is on the brink of prosperity. You know, one would have thought now is the time but the Scotia people don’t look at Guyana alone,” he added.
