By Devina Samaroo
Finance Minister, Winston Jordan believes the pending transaction between Republic Bank and Scotiabank could violate the country’s financial laws.
Republic Financial Holdings Limited, which owns the Republic Bank operations in the Caribbean, announced last week that it will be acquiring Scotiabank operations in several regional territories, including Guyana.
But Mr Jordan told News Room Monday that the Government can stop the transaction from taking place if it is going to breach the Financial Institutions Act (FIA).
“I think it would be violating certain aspects of the FIA law as it relates to concentration,” the Finance Minister stated.
“We can curb the transaction from happening if it’s going to violate any law as it relates to concentration and so on, we will say ‘no’.”
Concentration is a case where a relatively small number of firms account for a relatively large percentage of the market.
The Finance Ministry had reported that Republic Bank would end up owning more than 50% of the total banking assets in Guyana if it takes over Scotiabank’s operations.
Minister Jordan could not say specifically which section of the FIA would be breached, but he noted that this would be discovered during a due diligence process which will be conducted after a formal application for acquisition is made by the banks.
However, since the announcement was made by the banks, the financial institutions have not formally written the country’s regulators, Minister Jordan said.
He said the Government and the regulatory agency, which is the Bank of Guyana, can only kick-start the process after it receives a formal application.
Mr Jordan explained that if the laws block the Republic/Scotiabank business deal, an alternative transaction is for Scotiabank to sell its assets to other financial institutions.
“They sell it open or seek to get another buyer or so on … an indigenous bank, existing banks, a consortium or local people or even if they want a foreign. But we wouldn’t have anyone bank or a subsidiary owning a certain percentage of the share,” he explained.
Mr Jordan said: “This is an opportunity for an indigenous bank or a group of investors.”
He noted that he already has three “real interests” from persons desirous of establishing banks in Guyana.
Prime Minister of Antigua and Barbuda, Gatson Browne, has already informed Scotiabank of his Government’s preference for indigenous banks to be given preference in acquiring its assets.
Minister Jordan indicated that he supports that posture.
“Mr Browne has come out and said openly what he will do. Clearly what he will do is consistent with his law and I think we have more or less the same laws,” the Finance Minister said.
Meanwhile, Mr Jordan expressed some disappointment that Scotiabank will pull out of the Guyanese economy since its establishment in the 1900s, without formally informing the Government.
“I felt that a bank that has been involved in the Caribbean for so long … you would think that the domestic government would be treated with a bit more respect,” the Finance Minister expressed.
Minister Jordan suspected that the Canadian multinational bank is pulling out because regional “derisking” concerns but he pointed out that Scotiabank remains in countries like Trinidad and Tobago, Barbados and Jamaica.
“In the case of Guyana, I don’t even see the reason how Scotia would wish to pull out at this time,” he said, referring to the country’s potential for major economic development when oil production begins in two years.
Chairman of the Private Sector Commission (PSC), Desmond Sears has already labelled the move by Scotiabank to pull out at this time as “regrettable”.