Although there is well-known fear that the sale of the Bank of Nova Scotia (Scotiabank) to Republic (Bank) Financial Holdings Limited could lead to dozens of employees being sent home, a source close to the transaction has revealed that this may be far from the truth.
According to the source, this and other issues were discussed at the recent Republic Bank Annual General Meeting (AGM) that was held on Monday. Guyana Times was told that it was decided that no employee of Scotiabank in Guyana will be made redundant.
Washington DC-based Financial Analyst Sasenarine Singh had expressed worry over the possibility of Republic Bank acquiring Scotiabank. He said it could lead to staff at the latter becoming jobless, and it would indeed have negative implications for the local financial sector.
“And what are they buying? They wouldn’t buy new locations. They are basically buying a loan portfolio and a deposit base. It’s easy for Republic Bank to get rid of most of the properties owned by Scotiabank and merge their portfolios,” he declared.
Former Presidential Advisor, economist Ramon Gaskin, also believes 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.
Gaskin said, “I think that this proposed sale of Scotiabank in Guyana to Republic Bank should not be allowed by the Government of Guyana and the Governor of the Central Bank.”
The outspoken economist had told Guyana Times that before Scotiabank ventured into any arrangement with Republic Bank, it should have consulted with the Government.
“Now that is putting the Government and the Governor in an awkward position of opposing it and all of that. I think (the banks) erred in not consulting with the appropriate authority before getting into it; and it shows a lack of respect, in my opinion, to the authorities here,” he said.
But more importantly, Gaskin believes that since Scotiabank wants to exit the Guyanese market, there should be an option for local entities to acquire its banking operations.
“They shouldn’t sell to any foreign bank. There isn’t any reason why the local Guyanese business people can’t get together and take it over from them. They can build a Guyanese bank with developmental features to help finance agriculture and small business,” he declared.
Meanwhile, the source also disclosed that the negotiations of sale between Scotiabank and Trinidad-based Republic Financial Holdings Limited (RFHL) will take between 12 and 18 months.
The RFHL has entered into an agreement to acquire Scotiabank’s banking operations in nine Caribbean countries. It is acquiring locations in Guyana, St Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines.
Further, the purchase price is US$123 million, which represents US$25 million consideration for total shareholding of Scotiabank Anguilla Limited, and a premium of US$98 million over net asset value for operations in the remaining eight countries.
The Guyana Government has 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”.
The Ministry, in a statement, said that it has taken note of the statement by RFHL that the agreement is “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 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,” the Finance Ministry said.
But the source argued that RFHL is not in breach of the Act, because any business would seek to have a Memorandum of Understanding (MoU) in place first. According to him, it doesn’t make business sense for the company to allow the regulators to know their options.
Republic Bank currently holds 35.4 percent of the banking system’s assets and 36.8 percent of deposits. The acquisition will up this to 51 percent of both assets and deposits.