Former President and Opposition Leader Bharrat Jagdeo has said that Republic Bank Limited’s impending acquisition of Scotiabank’s operations in Guyana could be unhealthy for the local financial sector.
“From what I’ve seen, the figures that I’ve read about is that the merge entity could control more than 50% of our total assets in the banking sector and more than 50% of total deposits. This is unhealthy and therefore I will support our regulators to uphold the law to avoid undue concentration in a single entity which puts our entire financial system at risk,” Jagdeo said during his most recent press conference.
According to Jagdeo, who is also a former Finance Minister, the takeover could very well be illegal since safety measures were put in place in the Financial Institutions Act and other legislations to guard against such concentration.
On Tuesday, Scotiabank announced that it has signed an agreement to sell its banking operations in Guyana and eight other Caribbean nations to Republic Financial Holdings Ltd. for an undisclosed amount.
Ignacio Deschamps, Scotiabank’s group head of international banking, said in the statement that due to increasing regulatory complexity and the need for continued investment in technology to support regulatory requirements, the bank made the decision to focus its efforts on those markets with significant scale in which it can make the greatest difference for its customers.
However, the Finance Ministry has since questioned why Scotiabank would want to pull out of Guyana and more so expressed its concern and regret about the bank wanting to go that route when, according to them, “Guyana’s economy is on the cusp of financial transformation with the onset of a massive new oil and gas sector raises.”
Moreover, the Finance Ministry said that the agreement raises a number of issues for the banking sector in Guyana and for the public which the Finance Ministry, the Bank of Guyana and the Government of Guyana will “need to carefully consider including the over-concentration of banking services, market domination and the ‘too big to fail’ risks.
Meanwhile, State Minister Joseph Harmon this morning told reporters that Cabinet is still in discussion as to how Government will approach the matter.