A GUY'S VIEW
Last week it was announced that Republic Bank had reached an agreement to take over the operation of The Bank of Nova Scotia throughout the region.
Were this to become reality, it would remove a major participant in the English-speaking Caribbean’s financial sector and consolidate a disproportionate share of the region’s banking business into fewer hands.
Introduction to economics teaches the dangers to an economy of having too significant a share of the assets, production of goods and/or services in the hands of one entity or too few entities. There are several reasons why this is not a good idea, one of which is that it can lead to the exploitation of consumers.
The dangers associated with the existence of monopolistic competition were cited among the reasons for the breaking up of the Cable and Wireless monopoly in the area of telecommunication services in Barbados, and the opening up of the market to other providers. This country was willing to pay a premium to Cable and Wireless to bring their monopoly arrangement to a premature end. Observers almost all agreed that this was an important decision in the protection of Barbadian consumers of those services.
Price gouging is a common feature of competitionless operations. After all, if there is nowhere else to go, the consumer must take whatever is provided, both in quality and in price. There is nothing good about that. Capitalism is undermined in such an environment.
This announcement in the banking sector draws attention to a few issues that affect our lives, even if they do not often make it to the discussion table, usually due to a lack of information. One such issue is the fact that while there are a few players in the region’s banking sector, judging from what we see in Barbados, their operation is not far removed from monopolistic practices. In fact, the oligopoly that currently exists is as harmful as monopolistic behaviour.
It often looks obvious that there is coordination of pricing of services offered by banks. Beyond pricing, there is a high degree of similarity of banking practices. Truth be told, one could walk into any bank in this country and do business in exactly the same way as would take place in any other bank, and suffer the same penalties for using their services. Although there may be different names on the buildings, coordinated effort could result in the same effect as if there were a single operator in the sector. There can be little argument against the force of oligopolistic competition in this sector.
There are only five named banks operating in Barbados. With so few operators in so small a space, it is nigh impossible to avoid friendly contact with the “competition”. While there may be nothing inherently wrong with contact, collusion rather than independence in the market place may be problematic.
Further, all of our banks are operated from Canada and or Trinidad and Tobago. Importantly, there is no local or other independent operator with an interest that may be different from what currently obtains in the sector.
Although there is a legal structure that requires supervision of banks, the approach has been, it seems, to leave them alone to do as they please. Hence, it matters not how much Barbadians complain about the unreasonable fees charged by banks, there has not been a word of comfort coming from the supervisor of banks. The effect is like giving them a licence to set their own rules and go off on a frolic of their own, regardless of how painful it may be for Barbadians.
In the face of a hostile foreign-owned banking sector, the credit union movement is prohibited from providing banking services. Although there are some services that credit unions may provide, they fall way short of what banks can offer. This raises another question for consideration. Are credit unions being kept out of full banking business so as to protect our banks from real competition? If one did not know better, this conclusion would be difficult to escape.
Both Antigua and Barbuda and Guyana have expressed concern about the Republic Bank move. One cannot help but be impressed with the declared position of the Prime Minister of Antigua and Barbuda. He asserted that if Scotiabank wished to wind up its operation in his country, a local interest must be given the opportunity to take over the business.
Thus far, the Barbados Government has been silent on the issue. The announcement that the Republic Bank take-over would lead to the closure of the regional hub of Scotiabank which is located in Barbados and would result in consequential job losses has not been sufficient to prise open the mouths of those who watch over our affairs.
It should be impossible for a sale of this nature to take place without the approval of the regulators in all of the countries and territories that may be affected by it. So that, while the Prime Minister of Antigua and Barbuda has made his position clear, the regulators in Barbados also must be transparent and inform us of their position on the sale.
It seems that Antigua has local banks that are willing to acquire the assets of Scotiabank. Barbados is not so privileged. But if Scotiabank is ready to pull up stake in this country and walk away, this presents a perfect opportunity for the Government to say to the credit union movement, here is an opportunity.
The Antiguan Prime Minister is trying to protect his people, their assets and his country. Apparently Barbadians and Barbados need no similar protection. Our authorities leave us exposed to the whims of foreign investors who, without conscience, as is their right, follow the money. Those who should be protecting us provide no break from the harsh winds of change that may be detrimental to us, and they apparently see nothing wrong with this attitude.
There have been rumblings that another Canadian bank is ready to leave Barbados and probably the region. If the Canadian interest in CIBC First Caribbean International Bank leaves, and Scotiabank is taken over by Republic Bank, where does that leave the banking sector in Barbados? In essence we are left with Royal Bank of Canada, First Citizens Bank of Trinidad and Republic Bank, but with the latter having the lion’s share of the market and in a position to price set and dictate everything else that happens in the market. This is an untenable situation.
Barbadians should be disquieted by the realisation that the greater portion of our economy, including the banking sector, will now be owned in Trinidad. He who controls the economy controls the country. This makes a mockery of the concept of independence. We have exchanged one master for another.
We need a Government that looks out for the interests of Barbadians. This economy may have started as a plantation, but there are people living on the plantation and they are no longer chattel. The most recent American civil rights challenge proclaims that Black Lives Matter. Black lives matter in Barbados too. Someone must speak for us.