The Board of Governors of the U.S. Federal Reserve System announced its approval of the application of the Bank of Nova Scotia to acquire 10% of the outstanding voting shares of San Juan, Puerto Rico’s First BanCorp.

The order notes that Scotia has stated that it does not propose to control or exercise a controlling influence over FBC. It has agreed to abide by certain commitments, such as: that it will not exercise a controlling influence over the management or policies of FBC or any of its subsidiaries; that it will not seek or accept representation on the board of directors of FBC or any of its subsidiaries; and not to have any director, officer, employee, or agent interlocks with FBC or any of its subsidiaries. It also has committed not to attempt to influence the dividend policies, loan decisions, or operations of FBC or any of its subsidiaries.

The board notes that Scotia and FBC compete directly in two banking markets that warrant a detailed review of competition concerns: St. John-St. Thomas and St. Croix. If Scotia were to acquire control of FBC, the post-consummation concentration levels would exceed US Department of Justice guidelines, as its resulting market share would exceed 35% in both markets, it says.

However, the board concludes, “that no significant reduction in competition is likely to result… Of particular significance in this case is the structure of the proposed investment, which is designed to limit the ability of BNS to control FBC… both BNS and FBC have proposed special safeguards to limit access by BNS to competitively sensitive information and to limit the potential for BNS to influence
the policies or management of FBC,” it says.

Also, the notice indicates that the DOJ also has reviewed the proposal and has advised the board that it does not believe that the acquisition would likely have a significantly adverse effect on competition in any relevant banking market. The appropriate banking agencies have also been afforded an opportunity to comment and have not objected to the proposal, it adds.