house 
Banking
With its exit from Central America and Colombia, Scotiabank follows the direction of international banks that are declining amid high compliance and risks.
ScotiaBank officially out of retail banking services in Panama, Costa Rica and Colombia, which represents the last step by a major international lender to expand its scope in the region. The deal, which gives SCOTIABANK a 20 % stake in Banco Davivienda in exchange for retailers, the broader trend as compliance costs for installation, seizure pressures, and converting profit priorities to rethinking their presence in Latin America and Caribbean.
ScotiaBank also meets the promises of the CEO of Scott Thomson he made in 2023 to re -concentrate the most profitable North American markets. The decision is the end of the expansion of its duration more than a decade, which initially challenged the direction of disposal. In 2012, ScotiaBank played a bold game for the growing financial sector in Colombia, where he got a majority share in Banco Colpatria for $ 1 billion. She continued to pay her to the area in 2016, where she bought retailed retail operations in Costa Rica and Panama for $ 360 million.
But while Scotiabank was expanding, many international banks were already re -evaluating them in high -risk markets.
“Since the large international banks that provide payment services to the region are facing tougher compliance measures, many have taken a decision of cost and benefits that the costs of material compliance with the practice of business in the region outweigh the benefits,” says Adrian Stokes, CEO of Quantas Capital at Jamaica. “Therefore, it makes sense well to stop providing banking services to correspondents to regional banks.”
This shift has accelerated in recent years, as the exit from banks is cited with a range of increasing compliance and fears regarding anti -money laundering regulations (AML) and anti -terrorist financing (CFT). The US Treasury, the European Union and the International Governmental Financial Procedure (FATF) was considered some high -risk markets, making operations more expensive. The increasing capital requirements, which were submitted after the 2008 financial crisis, contributed to preventing the provisions funded by taxpayers, in the direction of disposal.
Latin America and the Caribbean Sea region were beaten, as the previous one lost 30 % of the correspondence banks, according to a report issued by the bank in 2020 on international settlements. The Bahamas, Blaise, Dominica, Jamaica, St. Vincent and Grenaden lost at least 40 % of the correspondent banks between 2011 and 2020, with Trinidad and Tobago declined just below that threshold.
Economic consequences
Banking withdrawal has access to international financing and credit in regions that rely heavily on transfers, at a value of 20 % to 27 % of GDP in Central America and Tourism, which represents up to 90 % of GDP in some Caribbean countries. In 2022, tourism provided 1.8 million direct jobs and generated an estimated $ 62 billion in the Caribbean: approximately half the amount of $ 136 billion in GDP GDP estimates of the 2024 International Monetary Fund.
The scarcity of correspondence banks reduces access to international financing and credit, increases the cost of transactions for border payments, and delaying innovation, such as hotel attempts to go to money. For customers, the effects can range from lower access to trade financing, issues related to disinfection of foreign checks and transactions, and increased concerns related to dollars in some countries.
Over the course of the contract since HSBC has been fined at $ 1.9 billion to launder Cartic money in Mexico, other banks are still being investigated, including Wachovia and TD Bank, which was fined 3 billion dollars last October by the US Treasury Department’s Financial Crime Network.
“The same issues in the Central American markets and Latin America are enlarged in the Caribbean. “The operating costs of natural disasters should include in a more difficult environment than Central America, and (with) much smaller profits. Banks now take into account the reputable risks of privacy laws and rules, especially after Panama’s papers (scandal).”
The download also affected the money transfer organizations (MTOS) such as Moneygram, PayPal, Uae Exchandic and Western Union. Many have made decisions similar to risks from the region.
While Scotiabank will keep its commercial banking operation in Colombia, it works primarily as a center for relationship management for large private companies looking for international banking advice.
“This is a significant transformation in how to allocate capital,” Tomson told a round media newspaper in December 2023, referring to Scottabanck’s plan to focus on the most profitable North American markets. “The World Bank’s profile was not commensurate with the risk, and this clouds were on the total returns.”
Fill the gap
For customers in the Caribbean and Latin American region, this transformation reaches localization or domestication where international banks are captured by local banks or by large blocs in the region.
Bancolombia and Grupo Aval, who owned Banco de Bogotá and the BAC group in Central America, was one and two in their local market until ScotiaBank and Banco Davivienda. It has grown in Central America, after they acquired Grupo Fantormiero Reformador in Guatemala for $ 411 million in 2013. In the same year, Bancolombia acquired 40 % of Banco Agromercantil, also in Guatemala, for $ 217 million.
“The Colombian banks know the operating environment in Central America well,” says Megia. “Colombians are doing commercial business in Central America, so they really have savings savings in these markets.”
SIM, Scotiabank announced that in some of the Caribbean markets that are still active, bank profitability in 2024 was the highest in a decade. In the Bahamas, the net income of $ 70 million was 46 % higher on an annual basis compared to 2023. The Scotia Jamaica Group informed profits before the $ 164 million tax last July, and also 46 % higher than the previous year.
In a difficult environment, complicated by a new American administration, what does the area need on banks? Mikhaa suggests: “Specialized players are ready to work with the organizers,” Mikia suggests, “The region needs briefing ready to work within the regulatory frameworks. Once we get these creators, there is room for more specialized players to appear.”
However, the solutions to getting rid of the dispensation of this would keep the world’s motives in the region unclear. For global banks whose hopes of technology are attached as a solution to the operational cost and organizational issues, Blockchain and Finte are still facing the same issues as traditional banks. Neobanks has paid a strong boost to Mexico, especially Nubank in Brazil, as well as unconventional financial institutions such as Mercado Libre and Ualá. The latter is among about 50 companies awaiting verification of the National Banking and National Securities Committee (CNBV); The process may take at least 12 months, and is famous for delays.
The Caribbean Sea region finds its potential solution in the stable metal currencies of the Central Bank, such as DCash digital currency in the Eastern Caribbean. But laws are still placed throughout the region from the judicial states and the defensive measures of electronic attacks are still insufficient. Electronic attacks are still emerging in the region, so users have not faced the size of other parts of the world. The second concern is a mental attrition from the region, and the investigation of international information system security certificates in 2021 indicated that Latin America needed 530,000 Spring security professionals. “There is no silver bullet for the compliance challenges facing the region,” Stox says. “The only sustainable way to solve this problem is for the region to work in harmony to improve controls on AML/CFT issues.”
Some governments in the region blame the trend to get rid of the inconsistency and transformations in setting the bases by the US Treasury, FATF and the European Union. Added to these late time issues between the countries that pass the laws – that are compatible with them – and delay the removal of monitoring lists for several months after that. Some Latin American countries and the Caribbean region say this reaches bullying by the most advanced countries.
Last fall, President Jose Raul Mulino warned of Panama and others that companies were from countries that have not updated the lists of tax havens will not be considered for state contracts. Given that the 6 billion dollars of David railway, the rail railway project, is not an empty threat.
