THE Caribbean needs to make itself more attractive and resilient to international banking trends or, like Scotiabank’s decision to exit the Eastern Caribbean, Guyana and St Maarten markets, more banks could pull out because they may think “you colonials out there aren’t worth the trouble,” the Prime Minster suggested on Tuesday.
At a media conference at the end of a special Caricom Single Market Economy (CSME) meeting, held over two days at the Hilton Trinidad, St Ann’s, Dr Rowley said it was a little disturbing that Scotiabank – a Canadian financial group, was leaving the region and “that’s not a good thing.”
“It tells us that we need to make ourselves more attractive and become more resilient to ensure we have a banking sector that can withstand the conditions for international banking. Because the whole question of (the Foreign Account Tax Compliance Act) and the (Global Forum on Transparency and Exchange of Information for Tax Purposes), and whatever the penalties for being caught up in the risks of banking in today’s world, is causing larger banks in the metropolitan area to simply say, ‘you colonials out there aren’t worth the trouble’. And that is something we need to pay attention to,” Rowley said.
TT’s Republic Bank Financial Holdings Ltd has agreed to acquire Scotiabank’s assets in these markets for US$123 million. Government is the largest shareholder in Republic, with 51 per cent ownership, primarily through settlements from the Clico bailout.
“It might be seen in the context of the owners taking a decision that banking in the Caribbean is not worth the trouble or the risk, so (it) might be interpreted as a voluntary de-risking. Because if the bank wasn’t bought by a local bank, it was quite possible they may have done something else, and so we have to look to see who else might find the Caribbean unattractive for banking.”
Although Rowley acknowledged that Republic took the opportunity to grow outwards, he said he came to that conclusion when the government, advised about the deal, was also told another bank– that he did not name– was looking to exit the market and would have “made the news if not for certain other developments.”
Scotiabank has also sold its life insurance business to Sagicor which is headquartered in Barbados. Furthermore, Sagicor announced it would be acquired by Canadian investment firm Alignvest Acquisition II Corporation.
Sagicor’s financial performance for the first nine months of 2018 was $394 million, although the company noted it had made provisions to offset the impact of Barbados’ debt restructuring.
Barbados Prime Minister Mia Mottley agreed with Rowley that the region needed to step up its game.
“Unfortunately, we live in a world where capital is very mobile and where people will make decisions to go elsewhere if they can get a better return…No matter how much it may upset us, we can’t force anybody who to sell to, or who not to sell to. We can regulate the condition but unless the government is acquiring, we cannot force them.”
Caribbean companies like Republic have to be able to grow and even move beyond the region, she said, and people need to stop seeing themselves as victims. “We are masters of our own fate but very often we are not utilising our own resources. We have to get it right (or) we will continue to see institutions choose to leave the region.”