Scotiabank to withdraw from some Caribbean countries
by Lyf Compton
The attitude of the Bank of Nova Scotia (Scotiabank) in relation to the sale of its operations in some parts of the Caribbean is cavalier and disrespectful.
That is the view of Minister of Finance Camillo Gonsalves who came to that conclusion after reading comments made by Scotiabank’s CEO Brian Porter published in the Trinidad Guardian Newspaper.
Porter told the Guardian on November 27, “When you look at what we’ve retained in the Caribbean, that’s 90 per cent of the population. This strikes at the core of our strategy to bulk up and get scale in markets and geographies and businesses that we deem important, where we can turn the dial for our customers and shareholders.”
“Porter’s comments are illustrative of both Scotia’s cavalier attitude to the markets from which they are withdrawing and also to some of the global realities that we have to face up to,” Gonsalves told SEARCHLIGHT on Wednesday.
“He is pointing to the fact that he is still in Jamaica, Dominican Republic, Barbados and other places, but that is a very
cavalier attitude and fundamentally disregards the economies that he is abandoning,” Gonsalves stressed.
“It is not about the percentage of the population that you are still serving. It’s about the countries you have left and it reflects very poorly on Scotia as a bank that has historic ties to the Caribbean of over 120 years and for him (Porter) to take this attitude ‘well we are leaving but 90 per cent of the people can still get to a Scotiabank’, that is highly disrespectful to St Vincent and the Grenadines, the OECS and the other jurisdictions they have pulled out of,” the Finance Minister said.
Earlier this week, Scotiabank, Canada’s third-biggest lender announced its intention to sell its operations in Anguilla, Antigua, Dominica, Grenada, Guyana, St. Kitts and Nevis, St Lucia, St Maarten and St Vincent and the Grenadines.
The bank’s operations are expected to be offloaded to the Trinidad based Republic Financial Holdings Limited despite Scotiabank earning Can$2.27 billion in 2018, up from Can$2.07 billion in net income in the corresponding period last year.
In a statement, Ignacio Deschamps, Scotiabank’s group head of international banking, said the refocusing of its Caribbean strategy stemmed from “increasing regulatory complexity and the need for continued investment in technology to support our regulatory requirements.”
In response to the announcement of the sale, Antigua and Barbuda’s Prime Minister, Gaston Browne, wrote to the General Manager of Scotiabank in Antigua Suzan Snaggs-Wilson, informing her that the sale of the bank will not be allowed to proceed in Antigua and Barbuda until an application is made to the government and approval given.
Prime Minister Browne described as unacceptable that the authorities of the Bank would decide to sell its operations in Antigua and Barbuda without any form of consultation with the regulators or the Finance Minister whose agreement and authority for such a sale are required by law.
He also wants assurances that local banks will be given priority to purchase Scotiabank’s operations in Antigua, and that local persons’ investments and savings will be protected.
“I think that it is that sort of cavalier attitude that led Scotia to not have the consultations with local governments that it should have had if it was a respectful organisation and that is the attitude that led to Browne’s response,” Gonsalves commented in relation to the Antigua prime minister’s stance.
He added, “I take issue with Mr Porter…he said one of the reasons he is pulling out is because of increasing regulatory complexity and the need for the continued investment in technology to support our regulatory requirements.
“What he is saying here is that it is getting very expensive to do business in the Caribbean because of all the regulations that banks have to comply with to do business in the Caribbean.”
Gonsalves said that Scotiabank, if you were to listen to Porter, is pulling out, not because of regulations from local government but regulations form overseas.
“They are saying basically it is not worth it anymore. That they will do it for a big country if they have a lot of customers, but to have all of this compliance in small countries is not worth it to them anymore and that is why they are pulling out.
“Now mind you, Scotiabank made a bigger profit last year than it made the year before. They are making money, but they are saying essentially, they can make more money with less stress if they went elsewhere, that is the long and short of it,” Gonsalves summarised.
He however noted that by law, Scotia cannot sell its operations until an investigation is done by the Eastern Caribbean Central Bank (ECCB).
“The truth of the matter is neither Scotiabank or Republic have communicated formally to the government of St Vincent and the Grenadines in relation to this. What we know is from informal reports from the ECCB, but under the Banking Act and all of the members of the Eastern Caribbean Currency Union operate essentially under the same Banking Act, the ECCB has some steps that it has to accomplish before we can get to the point where the sale is actually consummated,” Gonsalves said.
He noted that Section 175 of the Banking Act says that when somebody plans to purchase a bank or merge, “the ECCB shall investigate the application including the particular circumstances leading to the proposed transfer, the ability of the transferee to discharge its obligations under the transfer and the effect which the transfer is likely to have on the banking services available to the public”.
“So, the ECCB has a role to launch an investigation into the conditions and terms of this proposed sale and that has not yet taken place and I think that is part of what prime minister Gaston Browne was hinting at,” Gonsalves said.
“We don’t have, and none of Eastern Caribbean countries have sufficient data on which to go because the Central Bank has been notified of this intention of Republic to buy Scotia, but they have not yet completed the necessary investigation under the law.”
Gonsalves said that once the ECCB investigation is completed, if it thinks fit, it will make a recommendation to the Minister of Finance to make a Banking Business Vesting Order which transfers the assets of the Scotia to Republic and that is what prime minister Browne is suggesting that he will not provide.
“I understand his statement and his unhappiness with the manner in which things have proceeded to date, but before I make a similar claim, I would want to see the results of the ECCB investigation,” the Finance Minister said.
Gonsalves added that what concerns him most at this time is the number of employees that would be affected by the merger.
“We don’t have that information, nobody has provided that and whether or not there is going to be attrition, retrenchment, whether they will hire more people, whether they will add branches.
“I don’t know how the customers would be affected and that is something that will come out with the ECCB investigation and our discussions with Scotiabank and Republic because we will have to summon them and have communication with what their plans are for St Vincent and the Grenadines,” Gonsalves said.