The rumour mill in Jamaica was white hot that one of the local banks was going to scoop up the Scotiabank operations in Guyana but that rumour has been proven wrong.
The proposed purchaser is in fact Republic Bank Limited (RBL) based in Trinidad and owned by Republic Financial Holdings Limited. However, while Scotiabank and Republic Bank are eager to make a deal, the regulatory powers that be in Guyana have not given their blessing, just yet.
According to reports from the Caribbean community and the Guyanese press, the Government of Guyana had raised several concerns noting that the deal is going to breach the Financial Institutions Act (FIA).
If the transaction is approved, RBL will end up owning 50% of the total banking assets in Guyana.
The Eastern Caribbean Central Bank (ECCB), in consultation with the ECCB Monetary Council has approved the transfer of assets and liabilities in several regional territories.
According to a release, Republic Bank has received the green light to take control of the operations of Scotiabank in Anguilla, the Commonwealth of Dominica, Grenada, St Kitts and Nevis, Saint Lucia and St Vincent and the Grenadines, pursuant to Section 43 of the Banking Act, but Guyana’s Minister of Finance Winston Jordan said the ECCB’s case is different from that of Guyana.
“I felt that a bank that has been involved in the Caribbean for so long … you would think that the domestic government would be treated with a bit more respect.”– Guyana’s Finance Minister Winston Jordan
“The Scotiabank in Guyana is not the same as the Scotiabank in the Eastern Caribbean and the role that they play in the Eastern Caribbean, is vastly different,” he said.
Jordan had explained in December that if the laws block the Republic/Scotiabank business deal, an alternative transaction is for Scotiabank to sell its assets to other financial institutions.
In fact, Jordan has raised concern that the Scotiabank deal in Guyana may even be illegal.
Speaking last year to the Guyanese press, Jordan stated, “I think it would be violating certain aspects of the FIA law as it relates to concentration,” the Finance Minister stated.
“We can curb the transaction from happening if it’s going to violate any law as it relates to concentration and so on. We will say ‘no’.”
Concentration is a case where a relatively small number of firms account for a relatively large percentage of the market.
The deal in Guyana is one of several where Scotiabank has sold its assets in the Caribbean. Other Caribbean nations have expressed displeasure at the moved by the bank that has been in the region for more than 100 years.
As reported by the Newsroom.com, Prime Minister of Antigua and Barbuda, Gatson Browne, has already informed Scotiabank of his Government’s preference for indigenous banks to be given preference in acquiring its assets.
Minister Jordan indicated that he supports that posture.
“Mr Browne has come out and said openly what he will do. Clearly what he will do is consistent with his law and I think we have more or less the same laws,” the Finance Minister said.
Meanwhile, Jordan expressed some disappointment that Scotiabank will pull out of the Guyanese economy since its establishment in the 1900s, without formally informing the Government.
“I felt that a bank that has been involved in the Caribbean for so long … you would think that the domestic government would be treated with a bit more respect,” said Guyana’s Finance Minister.
Minister Jordan suspected that the Canadian multinational bank is pulling out because of regional “derisking” concerns but he pointed out that Scotiabank remains in countries like Trinidad and Tobago, Barbados and Jamaica.
“In the case of Guyana, I don’t see the reason why Scotia would wish to pull out at this time,” he said, referring to the country’s potential for major economic development when oil production begins in two years.
Chairman of the Private Sector Commission (PSC), Desmond Sears has already labelled the move by Scotiabank to pull out at this time as “regrettable”.