A HIGH LEVEL SYMPOSIUM ON THE CARICOM SINGLE MARKET AND ECONOMY TRANSCARIBBEAN BANKING: THE REPUBLIC BANK LIMITED AND RBTT BANK LIMITED STORY By MICHAEL CRAIGWELL, CONSULTING RESEARCHER

2 CONTENTS ENVIRONMENTAL FACTORS EXPANSIONARY IMPETUS CROSSBORDER CHRONOLOGY DEGREE OF OWNERSHIP CROSSBORDER PERFORMANCE TAXATION BENEFIT REGIONAL DISPERSION OF BANKING GROUPS METHODS OF EXTERNAL MARKET ENTRY BENEFITS OF EQUITY PARTICIPATION NUMBER OF COMMERCIAL BANKS IN CARICOM, CREATING CROSSBORDER FIRMS

3 ENVIRONMENTAL FACTORS NATIONALISATION & LOCALISATION OF INDUSTRY: SOCIAL CONSCIOUSNESS AND GOVERNMENTAL POLICY OF EARLY 1970s. ECONOMIC DOWNTURN OF THE 1980s. SCARCITY OF FOREIGN EXCHANGE DOMESTICALLY IN THE MID-1980s. RETREAT OF FOREIGN TRANSNATIONAL BANKS DURING THE DECADE. DOUBLE TAXATION TREATY OF 1994.

4 EXPANSIONARY IMPETUS LONG HISTORY IN DOMESTIC MARKET THAT HONED MANAGERIAL EXPERTISE. DIFFICULTY INCREASING SIZE OF LOCAL OPERATIONS: RBL 35 branches and RBTT 17 Branches in NEED FOR GEOGRAPHIC DIVERSIFICATION. AVAILABILITY OF INEFFICIENT AND UNPROFITABLE OPERATING ASSETS. THE PROFIT MOTIVE.

5 CROSSBORDER CHRONOLOGY REPUBLIC BANK LIMITED Republic Bank (Cayman) Limited Natl Commercial Bank of Grenada CIBC West Indies Holdings Limited ( Barbados, St. Lucia, Antigua and St. Vincent) Natl Bank of Industry & Commerce of Guyana 1999 – Republic Bank T&T (Barbados) Limited

6 CROSSBORDER CHRONOLOGY REPUBLIC BANK LIMITED (contd) Guyana National Co-operative Bank Barbados National Bank Republic Bank (DR) S.A East Caribbean Financial Holding Company Limited (Parent of Bank of St. Lucia)

7 CROSSBORDER CHRONOLOGY RBTT BANK LIMITED 1985 – RBTT Bank Caribbean Limited St. Vincent & the Grenadines RBTT Bank (SKN) Limited of Nevis 1997 – Grenada Bank of Commerce 1999 – RBTT Bank Suriname 1999 – ABN Amro in the Netherlands Antilles 2001 – RBTT Bank Jamaica Limited 2003 – RBTT Trust Corporation Barbados 2004 – Caribbean Commercial Bank of Barbados

8 DEGREE OF OWNERSHIP BY RBL

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10 REPUBLICS CROSSBORDER PERFORMANCE

11 RBTTS CROSSBORDER PERFORMANCE

12 TAXATION BENEFIT TO RBL

13 TAXATION BENEFIT TO RBTT

14 REGIONAL DISPERSION OF BANKING GROUPS

15 METHODS OF MARKET ENTRY Greenfield Investment Strategic Alliances Equity Participation: –Joint-Venture –Mergers & Acquisitions –Reinvestment of Earnings to Increase Shareholding All forms of equity participation were used, but the acquisition of a majority or total shareholding was the preferred mode of external market entry.

16 BENEFITS OF EQUITY PARTICIPATION Regulatory Approvals for External Ownership and Operation of Enterprise more readily attained. Less Risky than Greenfield Investments. Greater Managerial Control than Strategic Alliances. Immediate Market Share. Quicker Turnaround to Improved Operations or Profitability. Less Negative Effects due to Cultural Differences.

17 Number of Commercial Banks in CARICOM, Territory The Bahamas998 Barbados776 Belize445 ECCB area Guyana576 Jamaica1196 Suriname677 Trinidad and Tobago866

18 CREATING CROSSBORDER FIRMS Social Consciousness among people of the Caricom region that we need to have greater ownership and control our most critical and productive economic sectors. Regional governments, singly and collectively, must identify industries that have a better chance of being efficiently operated by a regional enterprise beyond its shores;

19 Government Policy to Enable Entry: –Uniform and unambiguous legislation and regulatory guidelines for approval of foreign firms to operate in the country and sectors adopted; and –A fiscal regime that does not exorbitantly tax profits of regional firms or charge withholding tax at levels that make foreign investment undesirable. Managerial and Technical Expertise must exist. Underutilised or Inefficiently Operated Assets available to reduce start-up and turnaround time. Acquisition of Majority Ownership and Control. CREATING CROSSBORDER FIRMS

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