Trinidadian banking powerhouse Republic Financial Holdings’ planned buyout of some of Scotiabank’s operations in the Caribbean and the acquisition of Sagicor by Canadian firm Alignvest have been described by Central Bank Governor Cleviston Haynes as “unfortunate” developments.
But he suggested that the move should not come as a surprise since businesses were operating in a global environment where they would “seek to reposition themselves from time to time”.
“I think this is perhaps a slightly unfortunate development for the region because I think that certainly as it relates to banking the region has benefited both during the global financial crisis and more recently with the de-risking initiatives being taken from having these large Canadian banks in our presence,” Haynes told the Barbados Chamber of Commerce and Industry (BCCI) luncheon at the Hilton Resort on Wednesday.
The region’s financial system was jolted by the announcement that Sagicor Financial Corporation planned to sell its shares, valued at approximately US$536 million, to Toronto-based special purpose acquisition firm Alignvest Acquisition II Corporation.
The company also announced that it would, with Alignvest, acquire Scotiabank’s Life Insurance operations in Jamaica and Trinidad & Tobago, where Sagicor would sell insurance products to Scotiabank’s clients in Jamaica and Trinidad & Tobago.
At the same time Scotiabank announced that it would be scaling back operations in the Caribbean, revealing that it had entered into a deal with Republic Bank Holdings Limited worth US$123 million for the divestment of nine of its operations in the region.
Both transactions are subject to regulatory approval and other conditions.
Haynes, who was responding to questions during the luncheon under the theme: Barbados Economic Recovery: Adjustment, Adaptation and the Way Forward, said while regional residents may not like the fees and low interest rates at some of the Canadian banks here, these institutions were critical.
He said the pending exit of Scotiabank operations in Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines, Guyana and St Maarten, should be of some concern.
“There were things that we may not like such as the pricing at the banks and so on, but I think as regional economies, having Canadian [financial institutions] present has been to our benefit and therefore there must be a little concern where as a region it appears that we are beginning to lose some of these banks. It is something that we have to look at very carefully,” said Haynes.
At the same time, he said the region should also recognize that large companies were operating in a global environment and would want to make more profits while minimizing their risks.
“Banking in the region, particularly post the global financial crisis, has not been seen as being very profitable particularly for some of the Canadian banks who see significant risks but perhaps do not see the types of returns which they would want to make,” he said.