Sco­tia­bank’s sur­prise exit sends shock­waves through the re­gion’s bank­ing in­dus­try


The Bank of Nova Sco­tia is con­sol­i­dat­ing its in­ter­na­tional op­er­a­tions — good news for Sco­tia­bank but not so good for the Caribbean where it is clos­ing its fa­cil­i­ties in nine coun­tries, in­clud­ing Saint Lu­cia. Sco­tia­bank has a long his­tory in the Caribbean, op­er­at­ing in the re­gion since

1889. This lat­est move nar­rows its fo­cus to core Caribbean mar­kets, jet­ti­son­ing An­tigua, Do­minica, Guyana, Gre­nada, An­guilla, St Kitts and Ne­vis, St Vin­cent and the Gre­nadines, St Maarten and Saint Lu­cia but re­tain­ing op­er­a­tions in a dozen other coun­tries such as the Do­mini­can Repub­lic and The Ba­hamas. The off-loaded banks will be sold to Trinidad and Tobago-based Repub­lic Fi­nan­cial Hold­ings Ltd for US$123 mil­lion.

Sco­tia­bank, which earned US$9.1 bil­lion this year, may be with­draw­ing from parts of the Caribbean but it is cer­tainly not eas­ing off in­ter­na­tional mar­kets, with heavy in­vest­ments in Latin Amer­ica boost­ing its bal­ance sheet in 2018. The bank said its in­ter­na­tional bank­ing unit has grown

17 per cent year on year and con­trib­uted US$3.1 bil­lion to over­all growth in 2018.


So why are these nine Caribbean coun­tries no longer a part of the bank’s long-term strat­egy? Sco­tia­bank said it wants to sim­plify its busi­ness model and di­vest­ing is merely a mat­ter of size and scale. The bank played down the as­pect of risk, with Sco­tia­bank Se­nior Vice Pres­i­dent Stephen Bag­narol telling me­dia: “There are grow­ing com­pli­ance and reg­u­la­tory re­quire­ments. That is glob­ally what is hap­pen­ing [but] it is just a ques­tion of where you want to fo­cus. It is not about de-risk­ing these mar­kets but fo­cus­ing on larger scale and size mar­kets.”

How­ever, an ear­lier state­ment from Sco­tia­bank Pres­i­dent and CEO Brian Porter in­di­cates that de-risk­ing, while not the ma­jor im­pe­tus, was still very much a part of the bank’s de­ci­sion. He said: “Ex­it­ing these non-core op­er­a­tions is con­sis­tent with a strat­egy that be­gan five years ago to sharpen our fo­cus, in­crease scale in core ge­ogra­phies and busi­nesses, im­prove earn­ings qual­ity and re­duce risk to the bank.”

It’s the lat­ter that has Caribbean bankers on edge. De-risk­ing has long been a prob­lem in the re­gion as global tax watch­dogs clamp down on per­ceived ‘tax havens’. Ever-es­ca­lat­ing waves of reg­u­la­tion have re­sulted in sig­nif­i­cant rep­u­ta­tional dam­age and Sco­tia­bank is not the first in­ter­na­tional provider to de­cide do­ing busi­ness in the Caribbean is just not worth it.


Un­sur­pris­ingly, Sco­tia­bank’s shock pull-out has been widely con­demned through­out the re­gion. Not least be­cause many were taken un­aware, first learn­ing of the news through the fi­nan­cial press. Gov­ern­ment lead­ers across the re­gion have spo­ken out, with some claim­ing Sco­tia­bank did not ful­fil their le­gal re­quire­ment to give ad­vance no­tice.

An­tigua’s Prime Min­is­ter and Min­is­ter of Fi­nance Gas­ton Browne was out­raged, call­ing the move “un­ac­cept­able” and say­ing in a state­ment: “I am deeply con­cerned that the Bank of Nova Sco­tia would spring such an im­por­tant de­ci­sion on the peo­ple of An­tigua and Bar­buda, par­tic­u­larly its many clients who have dis­played great loy­alty to the bank for al­most 50 years.”

In Guyana, the gov­ern­ment ex­pressed con­cern that the move would in­crease Repub­lic’s mar­ket share to 51 per cent, mak­ing it ‘too big to fail’. Repub­lic cur­rently has op­er­a­tions in seven Caribbean ju­ris­dic­tions, but the Sco­tia­bank deal would dou­ble its pres­ence re­gion-wide.

Re­ac­tion from the pri­vate sec­tor was also swift and un­am­bigu­ous with union lead­ers quick to voice their anger. In Ja­maica, the Bus­ta­mante In­dus­trial Trade Union (BITU) ac­cused Sco­tia­bank of “job traf­fick­ing” with BITU Pres­i­dent Sen­a­tor Ka­van Gayle fur­ther elab­o­rat­ing: “What we call job traf­fick­ing is the act of bul­ly­ing, sell­ing or trans­fer­ring em­ploy­ees with­out clear jus­ti­fi­ca­tion.”

The STAR Businessweek reached out to the Caribbean As­so­ci­a­tion of Banks and the St Lu­cia Bankers As­so­ci­a­tion for their per­spec­tive but both de­clined to com­ment for this ar­ti­cle.


In the wake of the back­lash Sco­tia­bank de­fended the move, brand­ing it a “re­fo­cus”, rather than an exit. Ad­dress­ing a press con­fer­ence in Trinidad and Tobago, Bag­narol said: “These trans­ac­tions are still

sub­ject to reg­u­la­tory ap­proval and we will work with all the dif­fer­ent govern­ments and reg­u­la­tors to make sure there is a smooth tran­si­tion. We will make sure we go through all the right chan­nels and pro­cesses.”

He said clos­ing the deal will take four to six months and high­lighted that there would be no job losses, with Repub­lic com­mit­ted to re­tain­ing Sco­tia­bank staff in the af­fected coun­tries. Af­ter the trans­ac­tion closes, Sco­tia­bank will con­tinue to serve

1.5 mil­lion cus­tomers in the Caribbean and ser­vice 90 per cent of the mar­ket. “We’ve made it very clear that we’re com­mit­ted to the Caribbean,” said Bag­narol. “This is the right thing for Sco­tia­bank, the right thing for Repub­lic, the right thing for our cus­tomers and our staff in these mar­kets.”

But is it the right thing for the Caribbean? It’s too early to de­ter­mine the long-term reper­cus­sions of Sco­tia­bank’s move but the prog­no­sis is not good. The with­drawal of large, in­ter­na­tional banks from small Caribbean coun­tries hin­ders their abil­ity to de­liver on their de­vel­op­ment agen­das and also de­ters fi­nan­cial in­clu­sion.

Ad­dress­ing the CARICOM Sin­gle Mar­ket Econ­omy meet­ing in Trinidad last week, Prime Min­is­ter of Trinidad and Tobago Dr Keith Row­ley said: “[This] 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.”

For now, reg­u­la­tors are closely watch­ing the Sco­tia­bank deal. The East­ern Caribbean Cen­tral Bank (ECCB) is re­view­ing Repub­lic’s ac­qui­si­tion ap­pli­ca­tion and con­fer­ring with do­mes­tic cen­tral banks.

The ECCB said the deal would not “fun­da­men­tally change” bank own­er­ship in the re­gion and that con­sol­i­da­tion of this kind should be ex­pected, given global de­vel­op­ments and in­creased com­pe­ti­tion. The CARICOM Com­pe­ti­tion Com­mis­sion has also taken note of con­cerns from govern­ments and cus­tomers and said it is “mon­i­tor­ing de­vel­op­ments”.

Sco­tia­bank CEO Brian Porter: “Ex­it­ing these non-core op­er­a­tions is con­sis­tent with a strat­egy that be­gan five years ago…”

Sco­tia­bank head of­fice in Costa Rica lo­cated in La Sa­bana.The bank is the largest pri­vate bank in the coun­try, em­ploy­ing 1.200 peo­ple.

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