THE stability and strength of any financial system are an indispensable prerequisite for the overall health and well-being of an economy, says Finance Minister, Dr. Ashni Singh, and the current Administration has spared no effort in safeguarding the integrity of local financial systems.

Addressing the matter Monday during his Budget 2014 presentation to the House, Dr Singh said, “Our Government has spared no effort to ensure that the required regulatory and supervisory capacity and capability are in place to safeguard the integrity of the system.[box type=”shadow” align=”alignright” width=”300px” ]Highlights:
* Capital adequacy ratio in banking sector remained high at 23 per cent
* New Insurance Act and attendant regulations to come in 2014
* GT&T Mobile Money Guyana attracted 62,000 transactions valued at $255.4M
* Publication of cumulative financial prudential ratios for industry fosters more disclosure and transparency[/box]
“In this regard, efforts need to be made constantly to preserve the robustness of the regulatory and supervisory system, and to promote growth of the sector and access to its services.”

BANKING SECTOR
Reporting on the measures taken in 2013, Dr Singh said the banking sector remained strong, adequately capitalised, profitable and with high excess holdings of liquid assets. “The strength of the deposit-taking sector as evidenced by its capital adequacy ratio remained high at 23 per cent, surpassing the minimum eight per cent benchmark by 15 per cent as at close of 2013 and two per cent higher than the end 2012 position.
“The commercial banking sector continued its aggressive branch expansion drive with the establishment of branches countrywide particularly in the interior locations of Guyana.
“New branches were opened at Lethem in Region 9 and Port Kaituma in Region 1, while another bank would soon be establishing its presence in Region 6 at Port Mourant.
“Work is also continuing apace in the capital city on the construction of two new head offices for two of the smaller banks.”

INSURANCE
And, despite the significantly negative impact on the industry’s financial strength after the collapse of CLICO in 2008, the insurance industry has since rebounded successfully, as evidenced by the significant increase in assets, capital, and net premiums from the amounts reported in 2008 when the CLICO crisis hit the industry.
“For the year ended 2013,” the minister said, “the insurance sector was adequately capitalised in keeping with the requirements of the Insurance Act 1998.
“Both the long-term and general insurance sectors had assets in excess of liabilities by 72.3 per cent and 103.8 per cent respectively. This was complimented by the sectors’ ability to meet their expenses from growth in net premiums. As a result of the industry’s 2013 performance, positive growth in assets, capital and net premiums are also projected for the year 2014.”
He stated too that the industry’s capital also recorded a positive rebound after the CLICO debacle, showing an increase of 115 per cent above the $11.3B as at the end of 2008 to $24.3B.
“The insurance sector is presently quite solvent and stable,” he said, “even though the concentration of assets is centred on only few companies. The systemic failures by CLICO have reinforced the need for enhanced regulation in the insurance sector. Drafting of the new Insurance Act and attendant regulations are currently being finalised and it is anticipated that this act will become law before the end of 2014.”

BANK OF GUYANA
Turning his attention to the central bank, the Bank of Guyana (BOG), the Finance Minister pointed out that efforts are ongoing to bring about more transparency in the financial sector, such as the publication of the cumulative financial prudential ratios for the licensed financial institutions and the industry on its website. This is in addition to the quarterly financial indicators that have been published over the years.
In order to further strengthen its supervisory function, the Bank of Guyana in 2013 issued Supervision Guideline No. 13 (Anti-money Laundering and Countering the Financing of Terrorism) to the licensed financial institutions. Drafting has also commenced on legislation for pensions to provide more effective supervision and regulation of pension schemes, which will help to ensure the sustainability of the system.
According to Dr Singh, “A significant development within the financial sector was the licensing of the first credit bureau in Guyana.
“The milestone licence was issued to CreditInfo (Guyana) Incorporated in July 2013. All the commercial banks, two major utility companies and one microcredit provider have signed up to participate in the credit bureau. It is anticipated that the use of the credit reports generated by the credit bureau would contribute to significantly reducing the cost of borrowing while at the same time greatly increasing access to credit by a larger segment of the population thereby promoting a more efficient and stable credit market.”
He stated too that a further enhancement to the financial sector was the introduction of Mobile Money Guyana (MMG), a wholly owned subsidiary of the Guyana Telephone and Telegraph Company (GT&T).
The service is marketed to reach a large segment of the unbanked population by providing mobile payment services such as money transfers and bill payments, payment of salaries and pensions through the use of mobile phones.
Over 3,000 users have taken advantage of this technology, performing 62,000 transactions valued at $255.4M. Notably, the service has been found to be popular with persons who have prepaid meters with GPL and can now purchase their electricity directly over the phone.
Singh said, “The payment system is currently being reviewed to ensure that it remains efficient and effective.
“Commercial banks are in the process of linking their point of sale (POS) terminals and their automated teller machines (ATMs) and it is anticipated that by the end of this year any ATM/POS would be capable of accepting any card issued by any local bank.
“The Bank of Guyana has agreed to provide settlement services to facilitate this electronic switch which should see greater use of electronic services offered by commercial banks.”
Additionally, as it relates to the United States’ Foreign Account Tax Compliance Act (FATCA), the Government has indicated to the United States, Guyana’s availability to commence negotiations on an Intergovernmental Agreement (IGA) for implementation.
“The Guyana Revenue Authority has been identified as the conduit of financial information between Guyana and the US Inland Revenue Service (IRS),” the minister said.
He stressed that Government’s attention to prudent public financial management, in addition to stable macroeconomic fundamentals, has contributed to the economic resilience Guyana has achieved, which has enabled the country to withstand testing external and domestic shocks.

(By Vanessa Narine)