Last week the Central Bank of Belize, with the quiet consent of the previous government and the present one, signed off on the acquisition of Scotia Bank Belize by the Belize Bank. This deal has been on the table since late June this year, and it gives the Belize Bank 48.4% control of the banking sector, up from the 25.5% it controlled.

At the end of September 2020, less than two months before the merger was concluded, the Atlantic Bank controlled the most assets in Belize — 35.2%, while the Belize Bank had 25.5%; Heritage Bank, 14.6%; the National Bank, 1.8%, and Scotia Bank, 22.9% (numbers based on data from the Central Bank).

In its press release on the merger the Central Bank said its Board is committed to providing “effective oversight of the Belize financial system”, and that the deal was simply a matter of the bank’s owner, Bank of Nova Scotia, choosing to exit Belize.

Based on public expressions about the merger, there wasn’t much support for it in Belize. Former Central Bank governor, Glen Ysaguirre, told News5 in June that it was “a monumental deal that would obviously change the entire landscape of the banking system”, a sentiment shared by many. The feeling in some quarters is that the deal gives the Belize Bank so much control of the banking sector that it could do great harm to the country if the owner and his colleagues were so inclined, or were negligent.

The primary owner of the Belize Bank, Lord Ashcroft, has been a major player on Belize’s financial landscape ever since he got his foothold in Belize in the 1980s. In 1999, shortly after the PUP (1998-2003) was returned to power, he became the controlling shareholder in BTL, and a few years later he wasn’t acquiescent about allowing a rival company, INTELCO, to connect to BTL’s network because, he claimed, the government was tilting the playing field in favor of his rival.

The government of the day, a PUP administration, said INTELCO was encouraged because BTL was blocking its promised agenda to provide internet to schools, and telecommunications to the remotest part of the country.

For his defense, Ashcroft, a British citizen, reportedly leaned on a treaty Belize signed with the United Kingdom in 1982, which provided for British and Belizean citizens to get preferential treatment when doing business in each other’s countries.

After Lord Ashcroft screamed foul about the government’s support for INTELCO, a new player, Jeffry Prosser, appeared on the telecommunications scene as a buyer of BTL for a few months, and then he disappeared. The interconnection INTELCO desperately needed languished until the company collapsed, and that would lead to the most terrible financial fiasco in our country’s history — us paying over $500 million for BTL, three times what the company was worth.

The Central Bank has not declared any moves to strengthen the banking regulations, and until our financial experts have weighed in on the completed deal, we won’t know how worried we should be about the Belize Bank’s increased muscle. Interestingly, at least once we have been this way before. In 2007 the Belize Bank actually controlled 43% of the assets in the commercial banking sector in Belize.

A research paper, “The Evolution of the Financial Sector in Belize (1996 -2007)” that was prepared in 2009 by Gloria Garcia, Azucena Novelo and Christine Vellos of the Research Department of the Central Bank of Belize, shows that in 2007, the Belize Bank controlled 43% of the banking sector, the Atlantic Bank, 16%, Scotia Bank Belize, 23%, Alliance Bank (now Heritage Bank), 7%, and First Caribbean International Bank, since bought out by Heritage, 11%.

Considering our authorities’ seeming indifference in respect to one domestic bank in Belize dwarfing the rest, the Belize Bank could actually have been bigger. In July, Lord Ashcroft told his television station, Channel Five, that he did not move to take over First Caribbean when it was put up for sale back in 2015 because of a particularly bad relationship with the government at the time.

Credit unions, failing loans, the DFC, and what Belizeans get loans for

The Central Bank’s 1996-2007 research paper says that in 2007 our 13 credit unions had an estimated $410 million in assets, compared to $106 million in assets in 1996. In 2007 the Holy Redeemer Credit Union had $279 million in assets, an amount that was actually bigger than what was held by our country’s smallest commercial bank.

Data from the Central Bank shows that the total assets of credit unions in Belize in 2020 had increased to $1.1 billion, and the largest credit union, Holy Redeemer, had increased its assets to $641 million. Borrowers at credit unions are fairly consistent in meeting their obligations, with the Holy Redeemer Credit Union showing the most non-performing loans as of the last quarter: 3.35%.

The total assets of the commercial banks stood at $2.1 billion in 2007, and at the end of the third quarter of 2020 the assets of the commercial banks had increased to $3.7 billion. Among the commercial banks, non-performing loans at the National Bank increased from 4.96% in the second quarter to 8.37% in the third quarter, and the Belize’s Bank’s non-performing loans was at 1.34% in the second quarter and increased to 6.56% in the third quarter.

The Development Finance Corporation (DFC), the bank that takes the most risk in Belize, had a 19.6% rate of non-performance on loans on its books in its 2018 report. The DFC’s 2018 financial report says that 22% of the bank’s loans were for agriculture, 20% for residential purposes (home construction), 15% for professional services (support for the productive sector), 13% for education, 10% for tourism, 8% for commercial fishing, and 6% for manufacturing.

Consumer loans, construction activities, and real estate transactions dominate the loan portfolios at both the commercial banks and the credit unions. The Central Bank 1996-2007 research paper shows that in 2007, 24% of loans from commercial banks were consumer loans, 33% were for real estate and construction, 12% were for distribution (the service sector, retail trade), and 8% were for tourism, and at the credit unions 38% of loans were consumer loans, 35% were for building and construction, and 16% were for real estate.

The Central Bank’s statistics show that ten years later, in 2017, 39% of credit union loans were consumer loans, 27% were for construction, and 17% were for real estate transactions, and for the commercial banks, 28% of loans were for construction, 22% were consumer loans, and 14% were for real estate.