The Ministry of Finance is concerned about Republic Bank’s likely dominance of the banking sector, in the wake of Tuesday’s announcement of a buy-out of Scotiabank’s operations in Guyana and several other Caribbean countries.
“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,” the Finance Ministry said.
The Finance Ministry noted that Republic Bank currently holds 35.4% of the banking systems assets and 36.8% of deposits and the acquisition of Scotiabank 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,” the Finance Ministry said.
Other concerns raised by the Guyana government include the effect the takeover can have on competition, and the potential for Republic Bank having too much influence on pricing of banking products and rates.
The Finance Ministry said there were also issues related to correspondent banking options, and loss of jobs with Republic Bank likely to consolidate branches.
“The Ministry of Finance wishes to assure that it will continue to stay abreast of this matter, will act in the best interest of the Guyanese people and will issue subsequent updates as necessary,” the Finance Ministry added.
The Financial Institutions Act (FIA), the Finance Ministry says, 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.
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 Finance Ministry added.
The other Scotiabank operations in the takeover are in 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.
Republic Bank says the purchase price is USD 123 million, which represents USD 25 million consideration for total shareholding of Scotiabank Anguilla Limited; and a premium of USD 98 million over net asset value for operations in the remaining eight (8) countries.
This price, the bank says, does not include any amounts required to capitalize 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.