ST JOHN’S, Antigua, Thursday November 29, 2018 – The government of Antigua and Barbuda appears to be in a fighting mood over plans by Scotiabank to sell off its operations in the twin-island nation, while Guyana has also expressed concern that the sale will create issues for the banking sector in that Caribbean Community (CARICOM) country.
Scotiabank announced on Monday that it is shutting shop in Anguilla, Antigua and Barbuda, Dominica, Grenada, Guyana, St Kitts and Nevis, St Lucia, St Maarten, and St Vincent and the Grenadines, and has entered an agreement with Trinidad-based leading financial group Republic Financial Holdings Limited (RFHL) to purchase its banking operations in those “non-core markets” for US$123 million.
But Antigua and Barbuda’s Prime Minister Gaston Browne announced yesterday that he has advised the Eastern Caribbean Central Bank (ECCB) – which has regulatory responsibility for banks operating in Antigua and Barbuda’s domestic financial space – that his government will not be issuing a vesting order to facilitate the bank’s divestment of its Antigua holdings to RFHL.
In a November 28 letter to Timothy Antoine, Governor of the St Kitts-based ECCB, Prime Minister Browne said his administration was not consulted by Scotiabank regarding plans to divest its operations in his country.
“At no stage was the Government of Antigua and Barbuda consulted by the Bank of Nova Scotia nor was its agreement sought in this matter. The people of Antigua and Barbuda, including many persons holding deposits and other investment instruments with the Bank, learned of this divestment scheme through a media release,” he wrote to Antoine.
Declaring that “this matter has implications for the integrity of the banking system in Antigua and Barbuda and, indeed, for the stability of the Eastern Caribbean Currency”, Prime Minister Browne advised the Central Bank Governor that “the Government of Antigua and Barbuda has concluded that the divestment announced by the Bank of Nova Scotia is not in the overall interest of our country and our people”.
Copying his letter to colleague Heads of Government of ECCB member countries, some of which are similarly affected, Browne advised the Central Bank Governor that “until other options for divestment are explored, particularly providing a consortium of local banks the right of first refusal to acquire the Antigua and Barbuda operations, the Government of Antigua and Barbuda will not issue a vesting order”.
Meantime, the Ministry of Finance in Guyana said in a statement that the proposed sales agreement raises a number of issues for the banking sector and for the public which the Ministry, the Bank of Guyana and the Government of Guyana will need to carefully consider.
It noted that Republic Bank currently holds 35.4 per cent of the banking systems assets and 36.8 per cent of deposits and the acquisition will increase this to 51 per cent of both assets and deposits.
“This raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks,” it said.
“The Scotiabank decision, which is made when Guyana’s economy is on the cusp of financial transformation with the onset of a massive new oil and gas sector raises concerns and is regretted,” the ministry added.
The effect on competition and the potential for the bank to have too much influence on the pricing of banking products and rates, issues related to correspondent banking options and loss of jobs as a result of Republic Bank consolidating branches were other concerns.
The ministry pointed to the Financial Institutions Act (FIA), which has clear stipulations regarding acquisition of control and requires approval by the Bank of Guyana following the submission of an application and due diligence being conducted. The FIA also addresses the issue of “fundamental changes” as it relates to mergers and transfer of assets or liabilities.
However, Scotiabank has defended its decision, insisting that the Caribbean is very important to its overall operations, and even after the transactions in the nine countries it will still be servicing 90 per cent of the region.
“We have made clear we are committed to the Caribbean, we have made the recent acquisition in the Dominican Republic and the investments we are making in these other countries. We are driving now digital alerts all across the Caribbean and these are big investments the bank continues to make in these markets,” said Scotiatbank’s Senior Vice President and Head of the Caribbean South and East, Stephen Bagnarol, told reporters.
“So I think the key here is that we have been a bank for the Caribbean. This is not an exit from the Caribbean but a re-focus on markets of size and scale.”
Bagnarol stressed that the transactions are still subject to regulatory approval and the bank will work with all the various governments and regulators to make sure there is a smooth transition.