ECCB calls for calm, as it reviews application for sale of Scotiabank’s operations

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Eastern Caribbean Central Bank (ECCB) headquarters in Basseterre, St Kitts

By Caribbean News Now contributor

BASSETERRE, St Kitts — The Eastern Caribbean Central Bank (ECCB) has encouraged residents in the Eastern Caribbean Currency Union (ECCU) to remain calm, following the news of an agreement that will see Trinidad-based Republic Financial Holdings Limited acquire the Bank of Nova Scotia’s operations in nine Caribbean territories.

The territories are St Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, Guyana, St Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines.

In a statement issued on December 1, 2018, the central bank said it received an application from Republic Financial Holdings on Tuesday, November 27, “seeking regulatory approval to acquire the Bank of Nova Scotia’s operations and businesses in the Eastern Caribbean Currency Union (ECCU),” and that it has since commenced a review of this application, pursuant to the Banking Act.

“In this regard, the ECCB has held initial discussions with the Central Bank of Trinidad and Tobago and the Bank of Guyana. These regulators will collaborate on the review of this application. The ECCB will also confer with the Central Bank of St Maarten and Curacao,” the ECCB statement added.

The central bank noted that changes in ownership of banks are not uncommon and that the proposed transaction is the latest in a series of consolidation moves by the Canadian banks.

The ECCB said, “Citizens and residents in the ECCU should come to expect these developments as part of the banks’ response to both global developments and competition in the ECCU banking space. Indeed, the ECCB continues to encourage indigenous (national) banks to cooperate and consolidate to ensure the interests of the people of the ECCU are best served.”

Addressing concerns about the ownership of banking assets in the ECCU, as a result of the proposed acquisition, the central bank said, “At present, 55 per cent of banking assets are owned by three Canadian banks and Republic Financial Holdings and 45 per cent of banking assets are owned by indigenous (national) banks. The proposed acquisition, if approved, would not fundamentally change that ownership distribution, as 55 per cent of the banking assets would be owned by two Canadian banks and Republic Financial Holdings and 45 per cent of the banking assets would continue to be owned by our indigenous (national) banks.”

Commenting on the situation, St Kitts and Nevis’ prime minister and minister of finance, Dr Timothy Harris, said, “The matter is being studied and is not yet ready for decision-making, in that it has to be discussed at the Monetary Council level where additional information will be provided to the decision-makers based on the analysis of the regulators.”

Harris also shared similar sentiments to those expressed by the central bank in that persons should remain patient “as the due processes will have to occur, after which a decision will be made taking into account the best interest of the Currency Union, which is the collective responsibility of the Monetary Council.”

Shortly after last week’s announcement by Republic, Antigua and Barbuda Prime Minister Gaston Browne advised the ECCB that his government will not be issuing a vesting order to facilitate the Bank of Nova Scotia’s divestment of its Antigua holdings about which there was no consultation.

The prime minister wrote which has regulatory responsibility for banks operating in Antigua and Barbuda’s domestic financial space.

In a letter to Timothy Antoine, the governor of the ECCB, Browne said: “At no stage was the government of Antigua and Barbuda consulted by the Bank of Nova Scotia nor was its agreement sought in this matter. The people of Antigua and Barbuda, including many persons holding deposits and other investment instruments with the bank, learned of this divestment scheme through a media release.”

Declaring that “This matter has implications for the integrity of the banking system in Antigua and Barbuda and, indeed, for the stability of the Eastern Caribbean Currency”, the prime minister advised the Central Bank governor that “the government of Antigua and Barbuda has concluded that the divestment announced by the Bank of Nova Scotia is not in the overall interest of our country and our people”.

Copying his letter to colleague heads of government of ECCB member countries, some of which are similarly affected, the Antigua and Barbuda prime minister advised the Central Bank governor that “until other options for divestment are explored, particularly providing a consortium of local banks the right of first refusal to acquire the Antigua and Barbuda operations, the government of Antigua and Barbuda will not issue a vesting order”.

Republic Bank’s announcement that it has entered into an agreement to acquire Scotiabank’s operations in Guyana and eight other Caribbean territories also left officials at the Guyana Central Bank worried about the troubling ramifications of this move.

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.

Ganga said that he will be engaging his counterparts in the other regions where Republic Bank would be acquiring the banking assets of Scotiabank.

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.

It was also noted that the ECCB already regulates Republic Bank, since it has an operation in Grenada and a stake in a bank in Saint Lucia.

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