Local regulators have “fundamental” concerns regarding the proposed merger of Barclays Bank and the Canadian Imperial Bank of Commerce, and so no permission has been granted yet to the banks to marry their operations, Central Bank Governor Julian Francis said Thursday.
The banks have reportedly been operating as if the merger has already happened and have already instructed their staff members as to the start date of the new entity.
But Mr. Francis pointed out that if this is so, it does not mean that the merger is set in stone as planned events don’t always go through.
“I don’t want to trivialize this at all, but for example, we prepare for hurricanes and they don’t come,” said Mr. Francis, who was a guest on Love 97’s radio programme “Issues of The Day.”
He added, “Let me put it this way. Nobody can establish a bank in The Bahamas without the appropriate approvals. So, until that approval is given, I can assure you that merger will not exist.”
The banks signed an agreement last October to merge their operations in the Caribbean to create FirstCaribbean International Bank.
But a source close to the deal told the Bahama Journal Thursday that, “There’s a lot of issues still left to be resolved. The devil is really in the details.”
He said, “They’ve been proceeding as if they got permission.”
When the merger was announced nearly a year ago, Michael Mansoor, President and CEO of CIBC West Indies said, “We expect the transaction to be completed during the first quarter of 2002.”
Since then, officials of the banks have reportedly told their employees that a new date to close the deal would be September 1.
But that date has also come and gone.
It appears that both sides have much to iron out.
Governor Francis indicated that one of the concerns regarding the merger is the stake that CIBC’s Bahamian shareholders will have in FirstCaribbean Bank.
“There are very fundamental issues such as issues related to taxation and also some policy issues regarding what we would like to ultimately see as the Bahamian ownership of that new banking institution which would be formed in The Bahamas by the merger of the operations of those two existing banks,” Mr. Francis said.
CIBC is about nine percent owned by the Bahamian public. But Barclays is a private entity.
As a part of this transaction, Barclays and CIBC have agreed that people in the region would own a portion of the new entity.
“I believe that it is going to be necessary to have a clear understanding as to how that works in The Bahamas,” Mr. Francis said.
But no understanding exists yet, he indicated.
In announcing the merger, Charles Middleton, Barclays Regional Director of the Caribbean, said that during this approval period, it will be business as usual for customers of the two operations.
“As soon as we can, we will being the process of combining our two organizations,” Mr. Middleton said. “This will involve a period of detailed planning and subsequent implementation, which will be effected over 24 months. As this work unfolds, we will continue to keep our customers, employees and regulators informed of our progress.”
Officials have said that FirstCaribbean will offer customers enhanced products and improved and extended access to banking services, establishing itself as a significant Caribbean presence, enabling them to play a key role in the financial services industry in the region.
They said they believe that this merger is in the interest of their respective shareholders and will provide benefits and opportunities for customers, staff and the relevant businesses, which could be achieved either by operation or on a standalone basis.
One of the benefits and opportunities FirstCaribbean is expected to derive from the combination of the banks respective strengths in domestic retail banking in the region, which will create additional product sales opportunities across a wide range of retail financial service capabilities.
Once combined, FirstCaribbean will have approximately 87 branches and 123 automatic teller machines; operations in 15 Caribbean countries; 800,000 accounts, 31,000 employees, aggregated assets of US$9.9 billion and an aggregated net income before tax of US$174 million.
Barclays Bank, headquartered in Barbados, is one of the largest financial services in the United Kingdom with operations throughout the world. Barclays now has operations in 14 countries across 25 islands.
CIBC was first established in the Caribbean in 1920 and is one of North America’s leading financial institutions.
