How The Scotia Deal Went Down
And while the early reviews for the new Prime Minister aren't exactly raving - more seasoned observers might say, we've got to give him some time - after all, the ship of state is navigating through a rocky reef right about now.
But, some of the public's raised eyebrows have to do with the Belize Bank acquisition of Scotiabank which went through "quick fast", just one week after the election - after it had been first proposed in June.
The transaction - which creates the biggest single bank in Belize - is very much in the public interest - but has not exactly been attended by a shining light of transparency - in fact, there's been some secretive language deployed. So, Jules Vasquez has been digging to see how the deal went down. Here's his report:
This is how the Central Bank looked from outside on November 18th - quite non-nondescript - but inside, big things were happening, as the board - or a semblance of it - was reportedly meeting inside to decide on whether to approve the Belize Bank acquisition of the Bank of Nova Scotia But, did the board even have quorum?
The law says that the Board of directors shall consist of no less than three nor more than four other members.
But, it couldn't have that quorum because three of the members: attorneys Vanessa Retreage, and Nigel Ebanks along with diplomat Pat Andrews had already resigned - as per the request of the new Prime Minister:
Posted (November 12, 2020)
Hon. John Briceno, Prime Minister
"I am asking that all the appointed persons of the statutory board follow protocol, tradition that they should tender their resignations."
And they did - leaving the Central Bank Board without the stated quorum of appointed members - but 7News is reliably informed that that the Central Bank received a legal opinion from an attorney for a related party to the transaction, explaining how the meeting could still legally be held.
Apparently it was and the acquisition was approved - but a craftily worded Cabinet release says, quote:
"Joy Grant, Governor of the Central Bank of Belize had informed (Prime Minister Briceno) that at a meeting held on 11th November 2020 that the Central Bank granted the approval of the merger between the Belize Bank Limited with the Bank of Nova Scotia Limited. The Cabinet noted that under the Domestic Banks and Financial Institutions Act this approval was granted by the Central Bank of Belize and not the Minister of Finance." End quote.
The paragraph does not say who met, whether it was the board or the Bank Executives - only that approval was granted. And then - in an attempt to put distance between the new government and the controversial transaction, the release says "approval was granted by the Central Bank of Berlize and not the Minister of Finance," - short for, don't blame Briceno.
As an odd after thought, the release adds, "The Cabinet also decided that it would move promptly to appoint a new Board for the Central Bank of Belize," which alludes to the three resignations.
But, that's only part of the story - the other part is the structure of the transaction itself - details of which are just coming to light.
This internal document obtained by 7News speaks to that.
In a section headed as a "foreign exchange commitment", it explains that Scotia's Retained Earnings - referred to here as "excess capital" - of 45 million US dollars will be deposited at the Scotia or Belize Bank - and be sold back to Scotia in portions of 4.5 million US dollars quarterly.
Bottom line? Super-scarce US dollars from the banking system will finance the Ashcroft Alliance's bank purchase - taking precious hard currency out of the system:
The former Governor of the Bank warned about this possibility months ago:
Glen Ysaguirre - Former Governor, Central Bank (2008-2016)
"The significant amount of built up retained earnings that are sitting there. There's no way I think Scotiabank is going to leave that there. So there has to be something that will happen after the acquisition as to how that built up retained earnings will be traded and extracted over time by Scotiabank."
The Central Bank of Belize yesterday posted a release discussing the sale - a release that we were told would have been posted form the start of the week.
It says, quote, "The Central Bank of Belize advises the public that its Board of Directors has granted approval for the Bank of Nova Scotia Ltd. to sell 100% of the common shares held by Scotia Caribbean Holdings Limited in Scotiabank (Belize) Ltd. and for Caribbean Investment Holdings Limited to purchase SBL's shares.
Scotiabank (Belize) Ltd. and Belize Bank Limited are bound by a Transition Services Agreement, which will ensure a smooth transition post acquisition of the shares.
During the transition and for an interim period of 12 to18 months, Scotiabank (Belize) Ltd. will operate under a changed name - Belize Bank Corporation Limited; the Central Bank conducted a comprehensive assessment of the proposed applicationâ€¦to ensure that it will not be detrimental to the interest of depositors and customers, and the stability of the financial system." End quote.
Scotiabank to Operate as “Belize Bank Corporation Limited” During Transition Period
The merger of the Belize Bank Limited and the Bank of Nova Scotia limited is a done deal. This was first confirmed via a cabinet press release two days ago. On Thursday, however, the Central Bank of Belize issued a press statement in which it states that the board was guided in its decision by the primary objectives. According to the Central Bank, those objectives include, “maintaining confidence in and promoting the safety and soundness of the financial system in Belize, promoting prudent and fair banking and financial practices; and supervising licensees to determine whether they are financially sound.” Scotiabank and the Belize Bank are bound by a Transition Services Agreement, which will ensure a smooth transition post-acquisition of the shares. During the transition and for an interim period of twelve to eighteen months, Scotiabank will operate under a changed name – Belize Bank Corporation Limited. The Central Bank of Belize says that the decision of the shareholders for the sale of Scotiabank was not influenced by any conditions specific to Belize nor was it prompted by any action on the part of the Regulator. It says that the decision was made at a corporate level as Scotia Bank was exiting what it considers to be non-core operations. This strategy extends to reengineering its operations in the various Latin American and Caribbean territories. Before the approval was given, the Central Bank says that it conducted a comprehensive assessment of the proposed application, inclusive of the benefits and potential risks and vulnerabilities, to ensure that it will not be detrimental to the interest of depositors and customers, and the stability of the financial system.