While outlining that the move by Republic Financial Holdings Limited (RFHL) to acquire Scotiabank’s banking operations in Guyana, as well as several other Caribbean countries is not Guyana-specific, the Ministry of Finance has made public its reservations.
In a statement on the acquisition on Tuesday, the subject Ministry questioned why Scotiabank would want to pull out of Guyana and more so expressed its concern and regret about the bank wanting 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 Ministry of Finance, the Bank of Guyana and the Government of Guyana will “need to carefully consider.”
One such issue is what the Ministry said was Republic Bank wielding too much influence on banking products and rates as their acquisition of Scotiabank would invariably see assets and deposits within the local banking system increase exponentially.
According to the Ministry, “Republic Bank currently holds 35.4% of the banking systems assets and 36.8% of deposits and the acquisition will up this to 51% of both assets and deposits. This raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks.”
Also outlined was the potential for job cuts with Republic Bank likely to consolidate branches.
However, the Ministry which is headed by Finance Minister Winston Jordan, posited that the agreement between RFHL and Scotiabank is “subject to all regulatory approvals”.
According to the Ministry, the Financial Institutions Act (FIA) has clear stipulations regarding ‘acquisition of control’ and requires approval of the Bank of Guyana following the submission of an application and due diligence being conducted.
Further the FIA addresses as well the issue of ‘fundamental changes’ as it relates to mergers and transfer of assets or liabilities.
Outlining that it will continue to stay abreast of this matter, the Ministry noted that tit “will act in the best interest of the Guyanese people and will issue subsequent updates as necessary.”
On Tuesday morning RFHL announced that it has entered into an agreement to acquire Scotiabank’s banking operations in Guyana, St. Maarten and the Eastern Caribbean territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
In a statement on the acquisitions, the Trinidadian based company said that “the purchase price is US$123 million, which represents US$25 million consideration for total shareholding of Scotiabank Anguilla Limited; and a premium of US$98 million over net asset value for operations in the remaining eight (8) countries. This price does not include any amounts required to capitalise the branches post-closing. The agreement, executed on November 27, 2018 signalled the commencement of a transaction that is subject to all regulatory and other customary approvals and conditions.”