The Bank of Guyana (BoG) has rejected Republic Bank’s application for the acquisition of ScotiaBank while citing a number of concerns.
Minister of Finance Winston Jordan told Stabroek News last evening that Cabinet was alerted to letters that BoG Governor Dr Gobind Ganga would have dispatched to the Trinidad-headquartered Republic Bank and Scotiabank “and also the letter that was written to me, indicating that having done their examination and taking all the circumstances into consideration that they [BoG] could not approve the application.”
“This was discussed at Cabinet this morning and Cabinet concurred with the Governor’s pronouncement and they agreed that the reasons given were important reasons and the critical one being concentration, the risks involved and so on, AML/CFT [Anti-Money Laundering and Combatting the Financing of Terrorism] considerations, the lack of supervisory capacity by the bank itself; they are now building that capacity and so on. So when you take all of that into consideration, we did not feel that this application would be in Guyana’s best interest,” he added.
Jordan said that while the decision to sell is up to Scotia, government hopes that it might rethink its position as the Bank of Baroda has done. “We hope that Scotia can use this opportunity to… because you know Baroda has cancelled their exit, so to speak, so maybe Scotia, in the context of oil and gas and the speed at which that is being ramped up, maybe they will see the light perhaps and decide to stay. But in the event they don’t, I hope they take due consideration that Guyana is a sovereign country and we ought to be treated in that manner,” Jordan said.
This newspaper reached out to Republic Bank for a comment but up to press time there was no response.
In November of last year, Canada’s Bank of Nova Scotia announced that it had struck a deal to sell a string of its Carib-bean branches, including Guyana’s, to Trinidad-headquartered Republic Bank.
Following the announcement of the sale, 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 Scotia-bank 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.
Jordan later pointed this newspaper to Ganga for information as he said he takes “a hands off approach” on such matters given that it is the bank that is responsible.
More than six months ago, Republic Bank had submitted to the BoG an online repository of documentation via a Virtual Data Room as a requirement for the processing of needed information for the possible acquisition.
Ganga had said that the information received is a lot and, therefore, he could not give a timeframe as to when processing by the Central Bank would be completed. “It is a lot of stuff, it is going to take a while, not something that can be done overnight,” he said.
During that time, Republic Bank, according to executives, had sought an audience with the Minister of Finance to discuss the issue and to find out what steps the bank could take to enhance its chances of getting needed permission for the takeover.
Jordan yesterday said that he believes that if the bank wanted to see him they would have found a way.
“As you know I am a busy person. I was in Trinidad in May attending the CDB meeting and I had a meeting with Scotiabank there. You would believe that Republic Bank’s home is Trinidad and Tobago. So if Scotiabank could have got to me there, I had a meeting with them, why would I not see Republic Bank in their own home territory? I am a busy person and I am sure with enough trying as Scotia did I would have seen them,” he added.
With Republic Bank having indicated that none of the staff of Scotiabank would lose their jobs or benefits if the deal went through, Jordan said that he hopes that if the bank continues to pursue a sale, that the same terms would be had.
However, he said that at the end of the day the bank could not be forced to do so and government does not want to impose.
“Obviously we will always push for the business to be sold as a going concern, including the workers retaining their jobs, their benefits and so on. Ultimately, it is a business decision,” he said.
“You may push for something but ultimately it is a business decision. We won’t want to impose too much on Scotia beyond that. I think all sides understand where we are coming from here. We want a much diversified financial system; one that can be managed appropriately by the Bank of Guyana, especially where AML/CFT considerations are taken,” he added.
He said that Guyana is cautious in preparations for the fourth round of AML/CFT reviews because “as you know we are going up for the fourth round, which is the hardest round and we want to make certain that all our ducks are lined up.”
