Central Bank: Trinidad and Tobago lucrative for mergers, acquisitions

Trinidad and Tobago has been described by the Central Bank as a lucrative market for investment following the recent acquisitions of financial institutions locally and regionally.

Deputy inspector of banks, non-banks and payments oversight Michelle Francis-Pantor made the statement at a Central Bank webinar on Thursday which addressed trends, legal frameworks, the role of the bank and the future of mergers and acquisitions within the financial sector.

Other panellists included senior examiner at the office of financial institutions Alisha Corbin-Connelly and manager of banks and non-banks Kendall Cuffy.

The session also sought to explain mergers and acquisitions and the impact on an economy, especially in a pandemic.

Francis-Pantor said, “While local financial institutions have been looking outwards, regional and international financial institutions have been looking at TT as a lucrative market.

She said, “Benefits (of mergers and acquisitions) included opening new markets, reduced competition, acquired expertise, creation of opportunities for growth and expansion and greater economies of scale.”

She said while there were many positives from such transactions, the creation of monopolies was a cause for concern, but added this can be monitored and dealt with accordingly to ensure a fair market. “The Central Bank is required to approve transactions,” she said.

Locally, there have been several mergers and acquisitions in the past couple of years which included both the banking and insurance sectors.

In 2019 and 2020, Republic Bank acquired the majority stake in Cayman National Corporation, as well as Scotiabank’s operations in Anguilla, Dominica, Grenada, St Kitts and Nevis, Saint Lucia, St Maarten and St Vincent and the Grenadines and the British Virgin Islands. Ansa Merchant Bank acquired Bank of Baroda and opened three branches this week as Ansa Bank.

Recently, a consortium of indigenous banks acquired the operations of Royal Bank of Canada in the Eastern Caribbean.

Insurance companies, also in 2019, made similar transactions with the Jamaican NCB Financial Group acquiring TT’s Guardian Holdings Ltd; Canada's Alignvest Acquisition II Corporation acquired Sagicor Financial Corporation; General Accident Insurance Co Jamaica Ltd and Micon Marketing Ltd took over Motor One Insurance Co Ltd and Colonial Group International Limited now owns Beacon Insurance Co Ltd.

Corbin-Connelly noted there were several legal frameworks supervision, regulation and monitoring mechanisms to prevent the formation of monopolies and unfair consolidations.

“Mergers and acquisitions are guided by the Financial Institutions Act 2008 as well as the Insurance Act 2018. Other applicable laws to be considered included anti-money laundering, combating the financing of terrorism, combating of proliferation financing laws.”

Before approvals are granted, Cuffy said, the process, which could take months, ensures thorough checks of a company's operations and finances before a transaction takes place.

“There must be financial soundness which included asset quality, liquidity, warnings and profitability and capital adequacy; and capacity which included leverage, funding of the transaction and ability of the controlling shareholder to provide current and ongoing support; and dividend policy and projected balance sheet, earning and cash flow.

“There is also need for proper corporate governance which looks at senior management composition, competence and expertise; the composition of board or parent board versus the subsidiary board; the number of independent directors on the board, board committees and the ability to maintain appropriate corporate governance and internal controls.”