Republic Bank takeover raises issues for banking sector
− Govt concerned about loss of jobs due to consolidation of branches, effect on competition
− Financial Institutions Act requires approval by the Bank of Guyana following the submission of an application and due diligence
DPI, Guyana, Tuesday, November 27, 2018
The Ministry of Finance, in a statement today, said the agreement which sees Republic Bank taking ownership of Scotiabank, 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.
It noted that 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.
Minister of Finance, Winston Jordan.
“The Scotiabank decision, which is made when Guyana’s economy is on the cusp of financial transformation with the onset of a massive new oil and gas sector raises concerns and is regretted,” the ministry further stated.
The effect on competition and the potential for Republic Bank to have too much influence on the pricing of banking products and rates, issues related to correspondent banking options and loss of jobs as a result of Republic Bank consolidating branches were other concerns.
The ministry has pointed to the Financial Institutions Act (FIA), which has clear stipulations regarding ‘acquisition of control’ and requires approval by the Bank of Guyana following the submission of an application and due diligence being conducted.
The FIA also addresses the issue of ‘fundamental changes’ as it relates to mergers and transfer of assets or liabilities.
The ministry emphasises that the announcement is not Guyana-specific, but is part of a region-wide refocusing by Scotiabank.
The public is being assured that the ministry will continue to stay abreast with the matter and will act in the best interest of the citizenry and issue updates as necessary.
Stacy Carmichael.
Image: Keno George.