RFH’s Scotiabank takeover unhealthy for financial sector – Jagdeo

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first_imgFormer President Bharrat Jagdeo has stated that Republic Bank Limited’s impending acquisition of Scotiabank’s operations in Guyana could be unhealthy for the local financial sector.Speaking at his weekly press conference on Thursday, the Opposition Leader told reporters that he is willing to support Government to avoid a situation that will put the country’s financial sector at risk. “From what I’ve seen – the figures that I’ve read about – is that the merged entity could control more than 50 per cent of our total assets in the banking sector and more than 50 per cent of total deposits. This is unhealthy and therefore I will support our regulators to uphold the law to avoid undue concentration in a single entity, which puts our entire financial system at risk,” the former Head of State posited.According to Jagdeo, who is also a former Finance Minister, the takeover could very well be illegal since safety measures were put in place years ago in the Financial Institutions Act and other regulatory legislations to guard against such excessive concentration.On Tuesday, the Canadian-based Scotiabank announced that it has signed an agreement to sell its banking operations in Guyana and eight other Caribbean nations to Republic Financial Holdings Ltd.Guyana Times understands that the deal is worth US$123 million.“Due to increasing regulatory complexity and the need for continued investment in technology to support our regulatory requirements, we made the decision to focus the bank’s efforts on those markets with significant scale in which we can make the greatest difference for our customers,” Ignacio Deschamps, Scotiabank’s group head of international banking, said in a statement.Meanwhile, Chairman of Republic Financial Holdings Limited (RFHL) Ronald Harford, said the move will benefit everyone in the long run, including Scotiabank’s clients and employees and the group’s own stakeholders.“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,” Harford said.Broken down, the US$123 million purchase price represents US$25 million of total shareholding of Scotiabank Anguilla Limited; and a premium of US$98 million over net asset value for operations in the other eight countries – St Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines.In its initial reaction to the biggest takeover in the financial sector, Government, through the Finance Ministry, questioned why Scotiabank would want to pull out of Guyana and more so expressed its concern and regret about the bank wanting go that route when, according to them, “Guyana’s economy is on the cusp of financial transformation with the onset of a massive new oil and gas sector raises.”Moreover, the Finance Ministry 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”.One such issue is what the Ministry said was Republic Bank wielding too much influence on banking products and rates as their acquisition of Scotiabank would invariably see assets and deposits within the local banking system increase exponentially.According to the Ministry, “Republic Bank currently holds 35.4 per cent of the banking systems assets and 36.8 per cent of deposits and the acquisition will up this to 51 per cent of both assets and deposits. This raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks.”Also outlined was the potential for job cuts with Republic Bank likely to consolidate branches.Nevertheless, Minister of State Joseph Harmon on Friday told reporters at this week’s post-Cabinet press briefing that the Council of Ministers is still in discussion as to how Government will approach the matter.“We are assessing the situation. We will determine what is in our best interest… as it affects us here in Guyana,” Harmon stated.last_img

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