The Ministry of Finance today said the intended acquisition of Scotiabank by Republic Financial Holdings raises important regulatory questions which need to be carefully considered and it expressed regret that the Canada-based bank was pulling out of Guyana while the country was on the brink of financial transformation.
A statement by the Ministry of Finance follows:
Ministry of Finance statement on Republic Bank/Scotiabank agreement
The Ministry of Finance notes the announcement today of the agreement for control of Scotiabank by Republic Bank in nine Caribbean territories including Guyana.
The Ministry emphasizes that this move is not Guyana-specific and is part of a region-wide refocussing by Scotiabank.
The Ministry of Finance notes the statement by Republic Bank that the agreement is “subject to all regulatory approvals”.
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.
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.
These issues include:
i. 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.
ii. Effect on competition and the potential for Republic Bank to have too much influence on pricing of banking products and rates.
iii. Issues related to correspondent banking options.
iv. Loss of jobs with Republic Bank likely to consolidate branches.
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 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.