‘Missing’ letter stalls Republic Bank’s Scotia takeover

A decision on the Trinidad-headquartered Republic Bank’s pending acquisition of Scotiabank’s operations here has been stalled as the Bank of Guyana (BoG) is awaiting a response to a request for documents from Republic Bank. However, the bank claims it has never received such a request.

“The bank has not yet received that request from the Bank of Guyana,” Republic Bank’s General Manager – Group Marketing and Communications, Michelle Palmer-Keizer, told Stabroek News when asked about the reason for the delay in submission.

But BoG Governor Gobind Ganga is adamant that a formal request was made to Republic Bank and confirmed to this newspaper, when contacted, that a request to submit the application of acquisition and the plan, was made by the central bank via letter. 

In November of last year, Canada’s Bank of Nova Scotia announced that it had struck a deal to sell a string of its Caribbean branches, including Guyana’s, to Trinidad-headquartered Republic Bank.

Following the announcement, the Ministry of Finance here said the deal raised a number of issues for the local banking sector and for the public, which the Ministry, the BoG and government will need to carefully consider. Among the issues it raised was that Republic Bank (Guyana) Limited currently holds 35.4% of the banking systems assets and 36.8% of deposits, and the acquisition of Scotiabank’s operations here will up this to 51% of both assets and deposits. The ministry said that this raises concerns about an over-concentration of banking services, market domination and ‘too big to fail’ risks.

The Ministry warned that any such acquisition would have to comply with the Financial Institutions Act and receive the blessings of the BoG.

Later in November, sources at the central bank had told this newspaper that following the announcement of the deal between Republic and Scotia, a meeting was held on the morning of November 28th 2018, between officials of the central bank and Republic. While one source had said that the acquisition of Scotia was discussed, among other matters, it is unclear if the letter was delivered then or subsequently sent to the bank.

Ganga had last year explained that certain BoG procedures in keeping with the Financial Institutions Act are to be followed and approved when mergers or acquisitions occur in Guyana and that Scotia had “certain obligations and Republic Bank would also have its part of obligations”.

This newspaper understands that Scotia has submitted the agreement between it and Republic Bank.

However, Republic Bank is still to fulfill the regulatory requirements required.

A source explained that while the central bank would have submitted a request to Republic Bank on what submissions are to be made, the onus is on Republic Bank to show that it meets all the regulatory requirements and satisfies that it is capable of being an asset to this country.

“The bank has to explain how it plans to manage its own capital. What we really mean is, if you get 51 per cent of the commercial banking space, and I do not mean overall financial space because there is a difference; then you need to deploy capital to do so. You have to explain what your capital plan to manage is, and all to (the BoG’s) satisfaction,” the source said. 


“Republic Bank must anticipate what the concerns are as they are not dissimilar from any other central bank.  You cannot stop people from buying and selling but you have to remember that the regulator has a responsibility to the market, particularly in the long term. It is all the regulator is doing. It is all we are asking. Show me how you plan to mitigate. It is not unfair.  You are being asked what any normal regulator would ask for and that is prove that you are capable of taking care of systemic and liquidity risks,” the source said.

 “The regulator won’t tell you what the risks are, you are the bank and you should know by reading the Act. Sending a letter of notification is not applying and a plan. They know this. They would have to do the same in their and other countries. If they were to acquire a large per cent of the commercial banking space, they must state what are the strategies you will put in place to mitigate a fallout. Banks will always collapse, it is what you will do when you collapse,” the source explained.

“Basically, the Bank of Guyana is just taking a commonsense approach. It is asking and needs answered, ‘How do you plan to mitigate, plans for competitive behaviour and the bank’s systemic risks. If you fail, how do you plan to deal with that because you will affect the other 49 per cent of banks and the country overall. A government will also need to know these things because it has to protect its people. Central bank will assess risks and always be conservative,” the source added.

Republic Bank has denied the claim that it would control up to 51 per cent of Guyana’s banking assets should its acquisition of Scotiabank’s banking operations here go ahead. “The combined Republic and Scotia entity would not account for much more than 33% of the financial system assets in Guyana,” the bank had told this newspaper, when asked about the concerns.

Scotiabank’s Senior Vice President – South and East Caribbean, Stephen Bagnarol would later add that the deal provides the best long-term solution for customers in Guyana and the two financial entities will seek to provide a smooth transition for customers and employees.

He observed that the agreement with Republic Bank is subject to regulatory approval and customary closing conditions. Until these are obtained and conditions met and the transactions close, all Scotiabank operations in Guyana will continue as usual. There will be no changes to accounts, and products and services remain the same at this time, he had said.

For its part, Republic Bank said that in the interim, it has been meeting with governments in other countries where similar actions have been taken. “Republic has been meeting with Government officials in the other jurisdictions in which Scotia has a presence and we have also been responding to questions raised by the other regulators,” Palmer-Keizer said.

Republic Bank’s President Nigel Baptiste had asked for a meeting with Guyana’s Minister of Finance Winston Jordan, but to date that meeting has not occurred. “We are still awaiting a response and are continuing to follow up,” Palmer-Keizer said.

Asked why the meeting has not taken place, she responded, “We are unable to give any reason as to why it has not yet come off but we remain available to meet.”

Stabroek News could not reach Jordan for comment as calls to his mobile number went unanswered.

Jordan has said that government is also assessing the situation since the India-headquartered Bank of Baroda has also given notice of its pulling out of Guyana. He said that having a well-known foreign-owned bank here augurs well for the investment climate, particularly given that Guyana is soon to be an oil producer and its Gross Domestic Product is expected to balloon.

And while he believes that an oil and gas economy will attract investment here from banks, Jordan has also said that the exit of Scotiabank and Baroda could serve as an opportunity for local banks to expand their operations and attract new foreign investors.

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