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Bank of Nova Scotia’s plan to pull out of nine Caribbean and South American countries hit another stumbling block this week as Guyana’s central bank turned down the lender’s proposed deal to sell its local operations.

The Bank of Guyana cited concerns about concentration and competition in denying Scotiabank permission to sell its Guyanese business to Republic Financial Holdings Ltd., the Trinidad and Tobago-based parent company of Republic Bank, which operates across the region. Republic Bank already holds more than a third of Guyana’s deposits and banking assets, and the combined entity would have had a market share of more than 50 per cent, according to the central bank’s analysis.

Scotiabank announced its deal to sell its operations in all nine countries to Republic Financial Holdings last November, subject to regulatory approvals. The divestitures are part of a broader strategy to sharpen the focus of Scotiabank’s once-sprawling international footprint. Exiting some smaller markets would reduce the bank’s exposure to an array of risks, from extreme weather to money laundering.

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The Eastern Caribbean Central Bank, which has jurisdiction over seven of the nine countries, has approved six of the transactions: in Anguilla; the Commonwealth of Dominica; Grenada; St. Kitts-Nevis; St. Lucia; and St. Vincent and the Grenadines. Scotiabank and Republic Financial Holdings are working to close those deals, as well as another in St. Maarten. But they have met with resistance from authorities in Guyana and Antigua, casting uncertainty over Scotiabank’s future in those countries.

Scotiabank has been locked in a standoff with the government of Antigua and Barbuda, which has refused to approve the sale of Scotiabank’s Antiguan branch. Antigua’s Prime Minister, Gaston Browne, has demanded that Scotiabank give local banks first right of refusal to buy the assets. And he has criticized Scotiabank in bombastic terms, accusing the Canadian lender’s executives of being “bloody-minded” and showing “a blatant disregard for the laws” of Antigua.

The Bank of Guyana informed Scotiabank and Republic Financial Holdings of its decision Tuesday, and concerns about concentration in the banking sector were “a major factor,” central bank Governor Gobind Ganga, said in an interview. “Then also there would have been the issue of systemic risk, because the bank would have grown so big.”

The refusal “is nothing to do per se with Scotiabank," Mr. Ganga said. “They have been here during the good and the bad times, and they have been here over 50 years. I mean, we would love to see Scotiabank remaining. We don’t have any problem with Scotiabank.”

Rather, Guyana’s central bankers worried about whether Trinidad-based Republic Bank “would have had the wherewithal” to build the necessary safeguards to protect the banking industry in Guyana and the wider region, “and that was something that was of concern to even [Trinidad’s] own regulator,” Mr. Ganga said.

Republic Financial Holdings chief executive Nigel Baptiste said his bank and Scotiabank needed approvals in at least four of the nine countries to move forward, and “will be closing as soon as everything is in place” in seven of the nine countries that Republic had initially targeted. But he said his company is no longer trying to buy Scotiabank’s Antiguan operations, and while there have been “a few internal discussions” about next steps in Guyana, executives “have not finalized on an action plan.”

“We are in daily contact with Scotia and they remain very committed to the transaction," Mr. Baptiste said in an e-mail.

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He said the opposition the banks have encountered in Antigua and Guyana doesn’t surprise him, but the banks had limited leeway to give government officials or regulators advanced notice of the deals “since both entities are publicly traded companies.”

A Scotiabank spokesperson declined to comment, and it is unclear how the bank plans to proceed in Guyana and Antigua. The transactions are not financially material to Scotiabank but, in aggregate, were expected to deliver a modest boost to the bank’s capital ratios.

On Aug. 19, Brendan King, Scotiabank’s senior vice-president of international banking, wrote a letter to Mr. Brown, the Antiguan Prime Minister, warning that if the transaction with Republic Bank in Antigua falls through, “we will need to re-examine all of our options, including the closure of our operations in Antigua and Barbuda.”

Even so, Mr. Browne’s government hasn’t budged, and appears to be at a stalemate with Scotiabank.

Mr. Ganga has not spoken to Scotiabank about the bank’s plans in Guyana, but said he’s not concerned that executives could choose to shutter local branches. “We know that Scotiabank always acts in a responsible way," he said. “We are just hoping for the best in that Scotiabank will remain, and they will choose the best option that will be good for our people.”

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