Bank Alliances: New Trend in Region

June 3, 2005

RECENT alliances between largemultinational banks and smaller CentralAmerican banks are part of a growingtrend in the region, the daily La Naciónreported this week.GE Consumer Finance, whichrecently bought 49.99% of the Banco deAmérica Central, or BAC (TT, May 27),and Canada-based Scotiabank, whichrecently bought the Salvadoran Bancode Comercio, are examples of the “big leagueplayers” entering the CentralAmerican market in increasing numbers.Because these larger banks can offer awider range of services at lower prices,they are providing fierce competition fortheir smaller rivals, the daily reported.Central America is an attractive marketfor foreign banks, in large partbecause many of its 40 million inhabitantslack access to formal bank services.Banks are attempting to take advantage ofthis potential by expanding their existingservice networks and offering innovatenew services as well.Some Costa Rican banks are expandinginto neighboring countries as well.Banco de Costa Rica already has allianceswith regional banks including Agrícola(El Salvador), Mercantil (Honduras) andG&T Continental (Guatemala).Grupo Interbolsa has createdInterbolsa Panama as a means to enter thePanamanian market. Corporación Interfínhas purchased 51% of the shares ofNicaragua-based ArrendadoraCentroamericana S.A.Alvaro Saborío, executive director ofBanco Cuscatlán, said larger banks andbank mergers often create a more efficientorganization, generating unemployment.

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