Opposition Leader, Bharrat Jagdeo does not believe that Guyana’s regulators should grant approval for Republic Bank to take over Scotia Bank’s operations here.
At a press conference, yesterday, Jagdeo said that “this could very well be illegal.”
He said, “I remember when I was Minister of Finance, we ensured that in the Financial Institutions Act and other regulatory legislation that we built in safety for concentration.
“And from what I have seen, the figures I have read about is that the merged entity could control more than 50 percent of our total assets in the banking sector and more than 50 percent of total deposits.”
The Opposition Leader said that this is unhealthy and therefore, he will support the nation’s regulators in upholding the law to avoid undue concentration in a single entity which puts the entire financial system at risk.
CENTRAL BANK WORRIED
Republic Bank’s recent announcement that it has entered into an agreement to acquire Scotia bank’s operations in Guyana and eight other Caribbean territories has left officials at Central Bank worried about the troubling ramifications of this move.
Kaieteur News was informed by several Central Bank officials that Republic Bank cannot purchase Scotia’s banking operations without its approval. They insisted that this business decision by Republic Bank is one that warrants a thorough due diligence process since the domino effect will be far reaching.
Kaieteur News was also informed by Central Bank Executives that Republic Bank has not submitted an application for approval regarding its move to acquire Scotia’s operations here.
Up to yesterday afternoon, Republic Bank had only issued the Central Bank with a letter which highlights that its Board has approved of the acquisition of Scotia in the Caribbean and Guyana.
Central Bank Governor, Dr. Gobind Ganga, said that when Republic Bank makes its application, several processes will have to be implemented to ensure that the financial institution abides by the requirements and criteria set out in the Financial Institutions Act.
Dr. Ganga told Kaieteur News, “In addition to that, we will be looking to see to what extent this move by Republic bank would interfere with fair competition in the banking sector.
“We will be looking at whether or not Republic Bank has the wherewithal because they are now acquiring a larger share of the banking system, not only in Guyana but elsewhere… Remember, they would becoming too big, they would be acquiring control of a little more than half of the banking sector.”
The Governor added, “And so we have to check for wherewithal. You can’t have a bank that doesn’t have the wherewithal to resist any situation that may arise (acquiring such a large share of the market)…One would have to check on their ability with capital and other things like management in terms of the governance that is required in this field…we have to look clearly at the implications of this acquisition from all sides…”
Dr. Ganga stressed that the Central Bank will have to examine this matter from a prudential basis. He said that everything will be done to ensure that Guyana’s banking sector remains strong, sound and profitable.
Further to this, the Central Bank head said that he will be engaging his counterparts in the other regions which Republic Bank would be acquiring the banking assets of Scotia Bank.
“This is a big move so we have to be extremely careful.”
REPUBLIC BANK ANNOUNCEMENT
In a statement to the media, Republic Bank announced on Tuesday that it has entered into an agreement to acquire Scotia Bank’s banking operations in Guyana, 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 said that the agreement, executed Tuesday as well, signaled the commencement of a transaction that is subject to all regulatory and other customary approvals and conditions.
Ronald Harford, Chairman of Republic Bank said, “This acquisition represents another major milestone for the Republic Group. As we grow and acquire significant positions in our existing markets, it is important that we continue to broaden our footprint, regionally and internationally.
“This agreement, which is subject to all regulatory approvals, affords us the opportunity to reach more clients in the Eastern Caribbean and Guyana, two markets we are familiar with, and build new relationships in St. Maarten…”
The Republic Group’s total asset base as at September 30, 2018 stood at US$10.5 billion, with equity at US$ 1.5 billion and profits attributable to shareholders for the year ended September 30, 2018 of US$ 198 million.
The acquisition of Scotia’s operations will increase the Group’s asset size by approximately US$2.5 billion.