Scotiabank is selling its Virgin Islands branch to the Trinidad-based Republic Financial Holdings Limited. (Photo: CLAIRE SHEFCHIK)

Scotiabank announced earlier this month that it has reached an agreement for the sale of 100 percent of the shares of its Virgin Islands branch to Trinidad-based Republic Financial Holdings Limited, which owns the Republic Bank group of banks — suggesting that the ongoing process of de-risking continues to affect the territory and the region at large.

The transaction “supports the bank’s strategic decision to focus
on operations across its footprint where it can achieve greater scale and deliver the best value for customers,” according to a press release from Scotiabank.

The new agreement is the latest in the Canadian bank’s ongoing effort to unload its Caribbean assets.

In September, the Eastern Caribbean Central Bank, with the ECCB Monetary Council, approved the application for the transfer of Scotiabank’s assets and liabilities to Republic Bank. In October, Grenada Prime Minister Keith Mitchell became the first in a series of regional leaders to sign the vesting order to facilitate Scotiabank’s $123 million sale of its banking operations in Anguilla, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Maarten and St. Vincent and the Grenadines to Republic Bank.

The VI agreement is subject to regulatory approval and customary closing conditions, according to the release. The banks did not disclose terms, but the Trinidad Express reported that a notice on the Trinidad and Tobago Stock Exchange put the price at $120 million.

The 2009 financial crisis coupled with tightening international regulations against money-laundering and terrorist financing have led US and other foreign financial institutions to attempt to weed out potentially risky customers in a process known as “de-risking,” in some cases ending their relationships with Caribbean-based banks.

Subsequently, Caribbean governments have raised concerns that the process could shut out the region from global financing, according to a report released last month by the Centre for Strategic and International Studies, a Washington DC-based bipartisan, nonprofit policy research organisation.

In fact, Republic Bank remains the only regional bank not to be de-risked, according to CSIS, which credited the bank’s robust anti-money-laundering standards. Besides Scotiabank, banks pulling operations out of the region include the Bank of America, Royal Bank of Canada, and Canadian Imperial Bank of Commerce, which earlier this month sold the majority of its shares in its Caribbean entity, CIBC FirstCaribbean, to GNB Financial Group. The group is a subsidiary of Starmites Corporation, the financial holding company of Colombian billionaire Jaime Galinski, who has banking operations in Colombia, Peru, Paraguay, Panama and the Cayman Islands. FirstCaribbean has a branch in the VI.

In 2017, a survey by the Caribbean Association of Banks found that 21 of the 23 banks in 12 Caribbean countries had lost at least one correspondent banking relationship, defined as an agreement between a foreign and domestic bank where a correspondent account is established at one bank for the other.

“The new normal is defined by restricted services, higher costs and limited access to wholesale finance,” the CSIS report’s authors wrote. “Those countries most affected by derisking are some of the smallest states in the Caribbean, where profitability is often the most challenged.”