IMF lauds Guyana’s efforts to strengthen financial oversight and regulations

Jul 15, 2017 News

Officials attached to the International Monetary Fund (IMF) have lauded Guyana’s efforts to not only strengthen its financial oversight but also its regulatory framework.

This statement, among others, was specifically made by Mr. Alexandre Tombini, IMF’s Executive Director and Mr. Daryl Cheong, IMF’s Senior Advisor.

The officials noted that despite capacity constraints, the local authorities have introduced risk-based supervision, enhanced on-site inspection capabilities and drafted a Crisis Management Plan.

They also noted the government’s plan to build on this progress by following-up on several of the recommendations from the IMF’s Financial Sector Assessment Programme (FSAP), which analyzes financial sector soundness and associated policies.

This is expected to be done by the local authorities over the near- to medium-term, including the implementation of Basel II minimum capital requirements, enhancing the quality of data for risk analysis and reviewing the treatment of collateral in banks’ provisioning.

Additionally, the IMF officials said that the local authorities are improving the regulatory framework. In this regard, they noted that the Insurance Act was passed in June 2016 with the Pensions Act expected to be passed by end 2017.

The two senior officers asserted that amendments to the Financial Institutions Act (FIA) are being made with the help of the World Bank.

They said that these pieces of legislation will enhance the supervisory powers of the Bank of Guyana (BoG) including in the areas of enforcement, resolution and financial inspection.

The BoG is also undertaking a comprehensive approach to modernize the national payment system with assistance from the World Bank. This will better serve the economy’s payment needs and realize cost savings, while helping to transition towards a greater reliance on electronic payments and promote financial inclusion.

Notwithstanding some weakness in asset quality, the IMF officials said that the banking system is well capitalized and profitable.

They said, “Capital to risk-weighted assets stood at 25 percent at the end of December 2016, and has consistently been above 20 percent over the last four years—much higher than the minimum eight percent capital requirement and the 12 percent as recommended by the FSAP mission.”

The officials continued, “With high net interest margins, bank profitability has been relatively robust over the past few years. The BoG continues to closely monitor the evolution of non-performing loans (NPLs) and holds regular discussions with commercial banks, who in turn are working with their clients to find actionable solutions.”

Meanwhile, although the local authorities recognize that provisioning may be lower than international standards and continue to review their guidelines, they are confident that the current levels are sufficient to protect against adverse shocks.

Further, the officials said that the BoG and the more stringent FSAP stress tests reveal that the banking system is resilient to negative shocks given the strong capital and liquidity positions.

On the issue of correspondent banking relationships (CBR), the IMF officials said that withdrawals have stabilized since the time of the FSAP mission in mid-2016. They noted however, that the local authorities remain vigilant and continue to build on the progress made to date.

The IMF officers said, “They have significantly strengthened their anti-money laundering/combating the financing of terrorism (AML/CFT) framework, enacting both the supervisory and regulatory requirements.”

The officers reminded that the authorities’ actions have resulted in Guyana’s removal from the Caribbean Financial Action Task Force’s (CFATF) process in November 2016 and therefore, the country is no longer subject to CFATF monitoring.

Since then, local banks were able to replace some correspondent banking services that were lost. With the help of the World Bank, the authorities have recently completed a National Risk Assessment which will also assist in improving the AML/CFT regime. They stressed that the FSAP was helpful in identifying gaps in the regulatory and supervisory framework.

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