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Jun 24, 2020

No Payment for Scotiabank to Come from Domestic Banking Sector

Glen Ysaguirre

The country is experiencing dwindling foreign exchange due to the economic downturn. Credit card spending is on a limit and importers say it has become increasing difficult to bring in goods and keep shelves stocked.  Now as it relates to the acquisition of Scotia Bank, assurances have been given by the Central Bank that the transaction will not be done using monies from the local financial sector to as to avoid any further shocks.  Scotiabank, on the other hand, reportedly has well over a hundred million dollars in retained earnings that will have to come from the domestic banking system at the point of closure.

 

Glen Ysaguirre, Former Central Bank Governor

“From the press releases that I saw and from the statement made by the governor, it gave some assurances that the funding for this particular transaction, they will make sure that it does not come from the domestic financial system because you are aware that our foreign reserves are already under pressure because of the lack of inflows due to COVID.  We don’t have any consistent foreign inflow right now due to COVID and so yes, there is some concern about that and while that assurance may give some comfort there is still some question as to details of the transaction that all of us may not be privy to, but one thing we are aware of is that there has been significant retained earnings in Scotiabank over the years.  I think the last numbers I saw which would have been for March 2020 shows that there is at least a hundred and twenty-four million Belize dollars in retained earnings that they had not been able to remit and I am sure that in the price that was given for that transaction it does not take into consideration that amount of retained earnings buildup or that would certainly then represent a significant discount in the price of the portfolio which I don’t think is the case.  So there has to be some mechanism which may have been alluded to in one of the releases I saw that would suggest that Scotia will be allowed over a period of time to extract that one hundred and twenty-four million dollars, I don’t know if it’s in its entirety or if it was discounted.  But in any event, that would have to come from the domestic system and I can see that in the future creating some pressures on an already limited foreign exchange availability in the system.”


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