Republic Bank Limited has submitted to the Bank of Guyana (BoG) an online repository of documentation via a Virtual Data Room as a requirement for the processing of needed information for its possible acquisition of Scotiabank’s operations here.
“They have a virtual room and they gave us all the information right there,” Head of the BoG Gobind Ganga told Stabroek News when asked for an update.
“We are currently looking for what we want and we have not completed that as yet. What we don’t have, we will have to ask them for it. So that is where it is,” he added.
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-headquart ered Republic Bank.
It was Minister of Finance Winston Jordan who pointed this newspaper to the Central Bank Governor for information as he said he takes “a hands off approach” on such matters given that it is the bank that is responsible.
Ganga said that the information received is a lot and, as such, 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.
In mid-January, he had explained that the process had been stalled as the BoG had been awaiting a response to a request for documents from Republic Bank.
A source had explained that while the Central Bank would have submitted a request to Republic Bank on what submissions are to be made, the onus is on Republic Bank to show that it meets all the regulatory requirements and satisfies that it is capable of being an asset to this country.
“The bank has to explain how it plans to manage its own capital. What we really mean is, if you get 51 per cent of the commercial banking space, and I do not mean overall financial space because there is a difference; then you need to deploy capital to do so. You have to explain what your capital plan to manage is, and all to (the BoG’s) satisfaction,” the source said.
“Republic Bank must anticipate what the concerns are as they are not dissimilar from any other central bank. You cannot stop people from buying and selling but you have to remember that the regulator has a responsibility to the market, particularly in the long term. It is all the regulator is doing. It is all we are asking. Show me how you plan to mitigate. It is not unfair. You are being asked what any normal regulator would ask for and that is prove that you are capable of taking care of systemic and liquidity risks,” the source added.
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.
‘Bank of Baroda’
Meanwhile, as it pertains to the India-headquartered Bank of Baroda (BoB), which has also given notice of its pulling out of Guyana, Ganga said that there has been no developments.
In December of last year, the BoB sought bids from investment bankers to carry out the sale of its Guyana-based subsidiary.
According to the Financial Express “The objective of this assignment is to sell/disinvest Bank of Baroda’s entire 100% stake in its subsidiary BOBGI (Bank of Baroda Guyana Inc) through investment bankers,” BoB said in a bid document.
The report said that the Guyana subsidiary’s total business stood at GYD 14,560 million (nearly $70 million) at the end of September 2018, down from GYD 20,576.5 million at the end of March 2017 and GYD 21,092 million at the end of March 2016.
The report said that the sale is part of a strategy to exit relatively less remunerative international markets by BoB, which continues to call itself ‘India’s international bank’. “Pursuant to the Government of India’s directives in respect of rationalisation of overseas operations of Public Sector Banks in India, Bank of Baroda India (BOBIN), decided to divest its banking activities from certain countries,” a statement from BoB read.
