Go Lean…Caribbean

Go Lean Commentary

There is no one entity designated to regulate the Caribbean banking sector in its full entirety. There are however some financial institutions doing business in much of the region who thusly have to make regionalized assessments. This includes NGOs like the World Bank and the Inter-American Development Bank, plus for-profit institutions like the Royal Bank of Canada (RBC) and the Bank of Nova Scotia (Scotiabank).

The subsequent news articles reflect the assessment of Caribbean economics from the point-of-view of Canadian Bankers: RBC and Scotiabank. Their conclusion:

All is not well in the Caribbean.

These articles highlighting the need for regional stewardship and oversight of banking in the Caribbean. This is the siren call of the book Go Lean…Caribbean; it serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) and Caribbean Central Bank (CCB) to provide better stewardship, to ensure that the economic failures of the past, in the Caribbean and other regions, do not re-occur here in the homeland.

According to these following articles, the need for this CU/CCB administration is past due:

Title # 1: RBC Wealth Management pulls out of Caribbean markets
Caribbean 360 – Regional News Site (Posted 11/21/2014; retrieved 12/30/2014) –
http://www.caribbean360.com/news/canadas-largest-bank-shutters-wealth-management-branches-in-the-bahamas-barbados-and-the-cayman-islands

BRIDGETOWN, Barbados – The Royal Bank of Canada (RBC) is now the latest Canadian bank to cut its losses in the Caribbean, following a decision to close its Caribbean wealth management divisions and several international advisory businesses in North America.

The move follows RBC’s sale of its Jamaican operations earlier this year, and an announcement by The Bank of Nova Scotia earlier this month of its plans to close around 120 branches in Mexico and the Caribbean (35 in the Caribbean specifically).

Canadian bank CIBC also suffered a net-loss on its FirstCaribbean bank operations in April 2014, for which it incurred a CDN $420 million goodwill impairment charge primarily related to its under-performing operation in the Bahamas.

Speaking to media sources in Canada following the RBC developments, Craig Fehr – an analyst with Edward Jones – said:

What we’re seeing is the banks are doing a thorough evaluation of their business mix and figuring out what makes sense long term and what is probably best left in the hands of someone else.

Sources indicate that the closure of RBC’s regional wealth management divisions – domiciled in The Bahamas, Barbados and the Cayman Islands – as well as management teams in Toronto, Montreal and the United States, could affect over 300 employees.

While heads of RBC’s regional wealth management divisions in the Caribbean declined specific comment on the exit and its impacts, RBC spokesman Claire Holland has confirmed the closures, while declining to offer specifics on the bank’s exit strategy:

“As there are a number of strategic options being considered as part of the exit, it would be premature at this stage to estimate the number of employees that will be impacted”, she said, while adding that the focus of the bank’s international growth strategy will now be on operating in major financial centres where RBC has “competitive strengths.”

RBC’s Caribbean wealth management divisions manage a portion of over CDN$43.2 billion in assets under the affected US and international wealth management operations.

When contacted for comment, Director of the Barbados International Business Association (BIBA), Henderson Holmes, said that his organisation was still trying to ascertain the facts before making a full statement on the RBC exit.

Holmes however cautioned that an exit “would not be good for Barbados”, while stating that BIBA’s current considerations were in whether a purchaser has been identified for the Barbados business, and whether its assets would remain in the country.

According to the International Monetary Fund, RBC, CIBC and the Bank of Nova Scotia hold around 60% of total banking assets in the Caribbean – a fact which the Fund says places the region at an increased risk of exposure to foreign financial crises.

For its part, RBC indicates that the closures will allow the bank to place increased focus on high net-worth and ultra-high net worth clients in key expansion markets, including Canada, the United States, the British Isles and Asia.

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Title # 2: Scotiabank loans to hospitality sector ‘impaired’
Nassau Guardian Daily Newspaper Website (Posted 11/07/2014; retrieved 12/30/2014) –
http://www.thenassauguardian.com/bahamas-business/40-bahamas-business/51574-scotiabank-loans-to-hospitality-sector-impaired
By: K. Quincy Parker, Guardian Business Editor

Scotiabank loans to the Caribbean hospitality sector have apparently lost hundreds of millions of dollars in value; a portfolio worth $1.3 billion a year ago fell to a $1 billion before a restructuring which has led to write-downs in the region, and which may mean branch closures and job losses in The Bahamas.

It appears that Scotiabank’s Caribbean write-downs – or adjustment to the value of its business – largely stem from three “net impaired” loans to the hospitality sector in the region. In fact, Canadian financial publications note that “trouble in the Caribbean” is becoming a common refrain. Scotiabank’s write-down follows on the heels of an even bigger one by First Caribbean earlier this year.

After 125 years of operations in the region, Scotiabank’s Chief Executive Officer Brian Porter said during a call this week that the bank will close a significant number of branches in the Caribbean (35 branches was the estimate given) as part of the restructuring. The shift is expected to mean layoffs as well, but local representatives could not speak to the extent – if any – of closures or job cuts in The Bahamas.

Scotiabank’s spokespeople told Guardian Business on Thursday that the lender’s growth in the region has “created some overlap and duplication of services”.

“As a result, we undertook a review of our operating model and international distribution network and found opportunities to strengthen our retail presence by investing in areas that are going to improve the speed and quality of service for our customers,” the bank said in a statement released to this paper.

Porter has announced changes including branch closures, restructuring charges totaling more than $450 million, 1,500 layoffs – mostly in Canada – and loan losses of $109 million in the Caribbean. He also revealed that Scotiabank will either close or downsize 120 branches, largely in Mexico and the Caribbean, to focus on high-growth markets such as Chile and Colombia.

The Scotiabank Bahamas statement said: “The numbers announced relating to branch closures were across the Bank’s international network.

“The bank is still undergoing its review and while this process will take some time, it will be carefully planned with consideration given to all affected stakeholders including employees and our customers”.

The Caribbean has had to learn hard lessons on banking … abroad. Due to the interconnectivity of the financial systems, bank troubles in foreign countries easily become trouble for the region. This was definitely true for the 2008 Banking Crisis that spurred the Great Recession. (Eventually the middle classes were impacted and shrunk our tourism marketing prospects). The events of this period were the lynchpin for the Go Lean movement, (book and blogs). This Go Lean book, and the associated movement, posits that the effects of the 2008 Great Recession continue to linger in the Caribbean. Therefore the book advocates instituting the appropriate governance on the region’s banking sector so as to apply the learned lessons from 2008. We do not want to be vulnerable to any financial mis-management of our North American neighbors; or some “plutocratic” elements there-in.

2008 was all about Wall Street (New York City). Today’s headlines are all about Canada. Though there is elasticity from these foreign financial centers, the Caribbean is big enough (42 million people in 30 member-states) to streamline its own viable financial / securities market. We can exert some control over our own economic destiny. We must assume the coveted role of protégé to our North American partners, not parasites, as experienced … to date.

The CU’s prime directive is to elevate the Caribbean’s economic-security-governing engines. Early in the book, the need for a regional steward was pronounced (Declaration of Interdependence – Page 13) with these statements:

xxiv.    Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxv.    Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and of the member-states.

The Go Lean book, and previous blog/commentaries, stressed the key community ethos, strategies, tactics, implementations and advocacies necessary to establish the regional financial eco-systems for Caribbean self-determination. These pointed are detailed in the book as follows:

The points of effective, technocratic regional stewardship, especially in response to the 2008 Great Recession / Financial Crisis, were further elaborated upon in these previous blog/commentaries:

Canada has been a dear friend to the Caribbean – see Appendices below. It is unfortunate that so many of their banks have experienced losses doing business in the Caribbean – we have been a ‘bad bet’. We want these Canadian banks and Canada in general to have good returns on their Caribbean investments and nothing but pleasurable experiences interacting with our culture and society. We want the Caribbean to be a better place to live, work and play for Canadians.

According to the foregoing news articles, our parasitic regional culture has not being gracious to our Canadian guest and direct investors. We need the proposed successes of the Go Lean roadmap for so many reasons; one strong motivation is to turn-around the results of the Canadian-Caribbean relationships. We must diversify our economy, fortify our security and improve our governance so that Canada would consider us in the role of a protégé, not a parasite again and again. This is the purpose of the Go Lean roadmap, to provide a turn-by-turn direction to move the region to that destination.

Don’t give up on us Canada!

🙂

Download the book Go Lean … Caribbean – now!

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Appendix A – Scotiabank in the Caribbean and Central America
We have been part of the Caribbean and Central America region since 1889 when we opened our first office in Kingston, Jamaica to support the trade of rum sugar and fish. This was the first time a Canadian bank had opened a branch outside the U.K. or the U.S. Scotiabank had a branch in Kingston before opening a branch in Toronto, Canada, where the Executive Offices are now located.

Some 120 plus years later, Scotiabank is the leading bank in the Caribbean and Central America, with operations in 25 countries, including affiliates. We are the only Canadian bank with operations in four of the seven Central American countries, namely Costa Rica, Belize, Panama and El Salvador.

Scotiabank Facts:

• Scotiabank employs 7,765 people in the region
• Serves more than two million customers
• About 99% of employees are hired locally
• There are 294 branches and over 655 automated banking machines (ATMs) throughout the region

Our international strategy focuses on investing resources in high-potential markets where Scotiabank anticipates solid, long-term economic growth. We pride ourselves on leveraging the best Canadian sales and service practices to retain and attract high-value customers abroad. Our core purpose is to be the best at helping you become financially better off by providing relevant solutions to meet your unique needs.
(Source: http://www.scotiabank.com/jm/en/0,,37,00.html retrieved December 31, 2014)

VIDEO – Scotiabank Celebrates 125 Years in Jamaica – http://youtu.be/17WPQTE4Lr8

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Appendix B – Scotiabank and the Diaspora

The Scotiabank Caribbean Carnival Toronto is an exciting three-week cultural explosion of Caribbean music, cuisine, revelry as well as visual and performing arts. In its 45th year it has become a major international event and the largest cultural festival of its kind in North America.

As Carnival is an international cultural phenomenon, the great metropolis of Toronto and its environs will come alive as the city explodes with the pulsating rhythms and melodies of Calypso, Soca, Reggae, Hip Hop, Chutney, Steel Pan and Brass Bands. This colourful exhibition and display of genius is truly a musical panorama that is certain to bring a pleasing smile to the ancestral titans of Pan and Calypso music.