Bank of Nova Scotia said Tuesday it will double its presence in the Dominican Republic with a deal to pick up some operations of the failed Banco Intercontinental.
The deal had been the subject of widespread speculation earlier in the week. In a statement, Toronto-based Scotiabank confirmed it will acquire 35 Banco Intercontinental branches in the Caribbean country and hire 460 of its employees.
The bank is also buying other financial assets, including the bank's credit card, personal and commercial loans "which meet quality and other loan criteria acceptable to Scotiabank."
The Dominican Republic's central bank took control of Banco Intercontinental in May, charging that it had collapsed after it had lost about $2.2-billion (U.S.) through embezzlement, fraud and bad deals.
Three executives and a former ambassador to France have been arrested in connection with the collapse.
The full purchase price wasn't disclosed although the deal also calls for the purchase of about $25-million in real estate.
After the transaction closes, Scotiabank - which last year added five new branches in the Dominican Republic - will become the fifth biggest private bank in that country.
Banco Intercontinental - commonly known as Baninter - was allegedly manipulated since 1989 to secretly grant off-the-books loans worth millions of dollars to shareholders and issue checks for fraudulent purposes.
The discovery led the Central Bank to seize the bank in May, and the government to take over holdings including 92 radio stations, four television stations and four newspapers. Two of the newspapers have since been shut down for lack of profits.
Authorities also charged the bank's president, Ramon Baez Figueroa, and two top executives, Marcos Baez Cocco and Vivian Lubrano de Castillo, with money laundering and fraud.
Last month, police arrested former ambassador to France Luis Alvarez Renta for allegedly embezzling funds from the failed bank.
Mr. Alvarez had been president of BankInvest, owned by Baez Figueroa, that accumulated 6.1-billion pesos in debts through loans from Baninter, according to the central bank.
Dominican business leaders including fashion designer Oscar de la Renta issued a written statement Monday supporting Mr. Alvarez and saying they hope to defend "his rights as a citizen in relation to the judicial process."
In Tuesday's statement, Scotiabank said it wasn't assuming any of Baninter's liabilities, but will work with that bank's customers who hold deposits to help them open Scotiabank accounts.
Tuesday's transaction will take place in two stages.
First, within the next 10 to 15 days, Scotiabank will buy parts of Baninter's credit card portfolio.
The second phase will see the Canadian bank take over the 35 branches. That is expected to start within the next 30 days and will take place over three months.
"We continue to see tremendous potential in this market," Peter Cardinal, Scotiabank's executive vice president for Latin America, said.
"Having been in the Dominican Republic for 83 years, Scotiabank is the oldest bank in the country, and we have the experience and expertise to ensure that our customers receive the products and services to meet their individual needs."
With Associated Press
Terry Weber