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The Scotia and Belize Bank merger: Too big to fail?

belize bank

Posted: Thursday, July 2, 2020. 3:53 pm CST.

By Aaron Humes: The number one and number two banks in Belize have agreed in principle to merge, and over the next four months, the Central Bank of Belize will explore whether it is safe and in the best interest of Belize for them to so do.

Despite the considered work done by Caribbean Investment Holdings Limited (CIHL) to advance the potential merger leaving, in one view, very little for the Central Bank to do, that doesn’t mean they don’t have to do their job, Prime Minister and Minister of Finance Dean Barrow said today.

A sober Barrow said he “did not know” whether CIHL, owner-operator of Belize Bank Limited, had sought prior approval from the Central Bank to explore the merger; he directed the question to Central Bank Governor Joy Grant. He added that he did not want to “personalize” an extremely consequential and critical issue, and that the regulator must demonstrate “that it has carried out in terms of the scrutiny before it can give approval, that the Central Bank must prove to people that it has done in a thoroughgoing and professional way.”

The Prime Minister emphasized that the Government cannot tread on the toes of the Central Bank nor give it directions, though he suggested getting outside expertise to look at the issue along with the bright minds on Goal Lane.

That the Central Bank must give final regulatory approval, the Prime Minister said, means it can also withhold it, citing Antigua and Barbuda and Guyana’s refusals of the purchases of Scotiabank by other banks recently.

And a cursory look at the statistics concerning the banks makes it clear that the transaction will have to be very carefully considered.

The Prime Minister cited the following statistics: the banks together, as of December 31, 2019, held 47 percent of commercial bank loans; 50 per cent of banking assets; 48 percent of deposits; 57 percent of current year profits; 60 percent of equity; 76 percent of quarterly net income; 67 percent of personal loans; 32 percent of commercial loans; 42 percent of residential loans; 80 percent of other loans. Together they hold 48 percent of deposits less than $20,000 and 49 percent of deposits greater than $100,000. Belize Bank has a 20 percent greater weighted lending rate than nearest competitor Atlantic Bank Limited, and Scotia’s is 13 percent higher.

In other words, according to the Prime Minister, the resulting merged operation would be “too big to fail.”

Barrow made clear that the government would have its say, and that his comments must be divorced from any personal feelings toward Lord Ashcroft, but expressed faith in the work of Governor Grant and the Central Bank Board.


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