CARICOM’s Competition Commission (CCC) has “reached out” to the local Competition and Consumer Affairs Commission (CCAC) following an assessment of the impact the proposed sale of Scotiabank assets in nine Caribbean territories is likely to have on the regional banking sector.
A press statement from CCC indicated that a completed a preliminary assessment indicates that the proposed transaction or parts thereof could possibly have anti-competitive effects in at least three Member States in the Community.
The three states have not been identified but CCC has indicated that it will “approach those national competition authorities and sector regulators in affected Member States in accordance with Article 176(1) of the Revised Treaty of Chaguaramas for the conduct of preliminary examinations of proposed transaction between the enterprises.” This article grants CCC the power to request an investigation if it “has reason to believe that business conduct by an enterprise in the CSME prejudices trade and prevents, restricts, or distorts competition within the CSME and has cross-border effects.”
The CCC went on to draw attention to Article 175 of the treaty which grants any member state the right to request an investigation where it has reason to believe that business conduct by an enterprise located in another Member State prejudices trade and prevents, restricts or distorts competition in their territory.
This investigation as outlined in Article 174 may see the Commission making determinations or taking action to inhibit and penalise enterprises whose business conduct prejudices trade or prevents, restricts or distorts competition within the CSME.
In its statement dated March 27, CCC reminded the national competition authorities and Member States of the “critical provision” of Article 175 and stressed that it will continue to monitor the proposed transaction in the Community and will inform as appropriate on further progress of this matter in affected Member States.
In November of last year, Canada’s Bank of Nova Scotia announced that it had struck a deal to sell a string of its Caribbean branches, including Guyana’s, to Trinidad-headquartered Republic Bank.
Following the announcement of the sale of Scotiabank to Republic Bank, the Ministry of Finance here said the deal raised a number of issues for the local banking sector and for the public, which the Ministry, the BoG and government will need to carefully consider. Among the issues it raised was that Republic Bank (Guyana) Limited currently holds 35.4 per cent of the banking systems assets and 36.8 per cent of deposits, and the acquisition of Scotiabank’s operations here will up this to 51 per cent of both assets and deposits. The ministry said that this raises concerns about an over-concentration of banking services, market domination and ‘too big to fail’ risks.
The Ministry warned that any such acquisition would have to comply with the Financial Institutions Act and receive the blessings of the BoG.
Republic Bank has denied the claim that it would control up to 51 per cent 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,” the bank had told this newspaper, when asked about the concerns.
Scotiabank’s Senior Vice President – South and East Caribbean, Stephen Bagnarol would later add that the deal provides the best long-term solution for customers in Guyana and the two financial entities will seek to provide a smooth transition for customers and employees.
He observed that the agreement with Republic Bank is subject to regulatory approval and customary closing conditions. Until these are obtained and conditions met and the transactions close, all Scotiabank operations in Guyana will continue as usual. There will be no changes to accounts, and products and services remain the same at this time, he had said.
