Why Are Banks Paring Operations in the Caribbean?
The Canadian Imperial Bank of Commerce, or CIBC, announced in early November that it was selling a majority stake in its Caribbean unit for $797 million. CIBC’s move followed an announcement from the Bank of Nova Scotia, or Scotiabank, that it had closed the sale of banking operations in seven markets in the Caribbean. In recent years, the Royal Bank of Canada also sold units in Jamaica and Suriname. Why are foreign-owned banks scaling back their operations in the Caribbean? How will such moves affect the sector and banks’ customers in the Caribbean? What is the outlook for the Caribbean banking sector in the coming year?
Vangie Bhagoo-Ramrattan, head of the economic research unit at First Citizens in Port-of-Spain, Trinidad and Tobago: “Since the global economic recession in 2008-2009, with a pervasive situation of mounting debt and low growth, the Caribbean continues to struggle with economic recovery. As a result, several countries elected to solicit assistance under an IMF program to restructure debt and/or initiate a series of fiscal reforms. This continued depressed economic environment, coupled with the rising threat of more frequent and intense weather events in the region (such as hurricanes and flooding), may have been some of the key decision points in selling off Caribbean exposure. Adding to these issues, in mid-2019, the Office of the Superintendent of Financial Institutions (OSFI) in Canada raised the capital buffer on Canada’s ‘big five’ banks amid concerns about economic conditions. At that time, the OSFI imposed a 25-basis point hike in the domestic stability buffer to 1.75 percent of the banks’ risk-weighted-assets, and another hike was announced to bring the rate to 2 percent effective Oct. 31, 2019. CIBC, Scotia and RBC are among the ‘big five’ and will be affected. They are expected to…”Read More
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