Scotiabank confirms that Argentine authorities have suspended the operations of Scotiabank Quilmes after the central bank decided not to provide additional liquidity to Quilmes.

“We had all hoped for a different outcome and are deeply saddened by today’s announcement,” said Scotiabank chairman and CEO Peter Godsoe. “Scotiabank Quilmes is a well managed and solvent bank. However, the severe economic conditions and liquidity problems in the Argentine banking system and the inability of Scotiabank Quilmes to secure additional liquidity from the Central Bank have resulted in this announcement.”
Standard & Poor’s said the suspension of the bank’s Argentine operations, would not affect the ratings or outlook on the bank.

Scotiabank Quilmes is the second foreign-owned bank in Argentina to have its operations suspended after its parent refused to provide additional liquidity to its operations. Its branches continue to operate on a limited basis, and are now under the control of the central bank.

Scotiabank has already accounted for this possibility in its financial reporting. “As indicated in our first quarter results issued on March 5 of this year, we assessed the Argentine situation very carefully, considered a number of different options, and took prudent action in the face of the ongoing economic volatility in the country,” continued Godsoe. “With these steps, Scotiabank is fully provisioned in terms of exposure to Quilmes and accordingly we anticipate that this latest event will have no material financial impact.”

Godsoe says that Scotia is working with Argentine authorities to explore alternatives and will be providing support to the government to help ensure this situation is dealt with properly, including maximizing returns to creditors and depositors, and safeguarding employees.

“Scotiabank remains firmly committed to our international operations and, outside of Argentina, we are very pleased with the performance of these operations and their contribution to the Scotiabank Group overall. We look forward to continuing our proud tradition as Canada’s most international bank,” concluded Godsoe.

Standard and Poor’s said losses in Argentina have already been discounted in the ratings on the bank, which are lower than those on the other major Canadian banks.