Central Bank still in the dark over acquisition plans – Finance Minister

Close to three months after it was announced that Republic Financial Holdings Limited (RFHL) had plans to acquire Scotiabank’s banking operations in Guyana, that process is yet to commence.
As such, the Bank of Guyana (BoG) has also been left in the dark as it relates to the RFHL’s plans in this regard, as it is still to submit certain documents to start the acquisition process.
This is according to Finance Minister Winston Jordan, who told the media at the sidelines of an event on Monday that the status quo ante remained at the moment.
“They (RFHL) are still to submit the relevant information to the BoG. The last time I spoke with the Governor (Gobind Ganga,) he said that process is still ongoing,” Jordan explained.
Asked whether there was a deadline for these submissions, the Finance Minister said a deadline could not be given, because Government was not the buyer, and they could also change their mind.
“Once they submit the relevant information that is being requested, the Bank will do what it is required to do under the (Bank of Guyana) Act. I think they’ll probably make a recommendation to Government,” he said.
In early December 2018, the Trinidad-based RFHL said it had entered into an agreement to acquire Scotiabank’s banking operations in nine Caribbean countries.
It said banks being acquired were located in Guyana, St Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines.
Following the announcement, the Antigua and Barbuda Government said it was “deeply disappointed” that Scotiabank would decide to sell its operations “without any form of consultation” with the regulators or the Finance Minister of that island nation.
The Guyana Government, on the other hand, had said 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”.
Concerns
The Ministry in a statement said that “this move is not Guyana-specific and is part of a region-wide refocusing by Scotiabank” and it has also taken note of the statement by RFHL that the agreement was “subject to all regulatory approvals”.
It posited that the Financial Institutions Act (FIA) has clear stipulations regarding “acquisition of control” and requires approval of the BoG 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,” the Finance Ministry said.
The Ministry stated that among the issues raised by the planned acquisition was the fact Republic Bank currently held 35.4 per cent of the banking system’s assets and 36.8 per cent of deposits, which the acquisition would increase 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,” the Ministry said.
It added that it would also have to take into consideration “the effect on competition and the potential for Republic Bank to have too much influence on pricing of banking products and rates”.
Former Presidential Advisor, economist Ramon Gaskin said he believed that the sale to Republic Bank would only allow that banking institution to dominate the local banking sector in Guyana, which could be unhealthy for the financial sector.
While on the other hand, Washington DC-based financial analyst Sasenarine Singh said there was a possibility that if Republic Bank did acquire Scotiabank, it would indeed have negative implications for the local financial sector.
Singh agreed that the bigger risk in this issue were allowing one bank to have too great a market share of the banking sector.