The institutions most often criticized by the Government and private sector officials are the banks. The most recent is that the banks are in the stone age. If the Government has the power to legislate, and the banks are among the most regulated institutions in the country, a relevant question is: having regard to the existing regulations, or the lack thereof, who has placed them in the stone age and who is keeping them there? Recently the Security Interests in Movable Property Act was passed in the National Assembly as an effort to extricate them out of the stone age. I wrote on it, describing it as “A transformative economic and financial instrument” in December 2024. For years officials have been ranting and raving about banks being ‘backward’ in not opening up lending possibilities without taking into account the absence of legal instruments to secure such lending. Now that legislation is in place lending is now possible on security other than mortgages of real property or by way of debentures on companies’ assets.
The legislation that affects the operation of banks are the Bank of Guyana Act, the Banking Act, the Financial Institutions Act, the AML-CFT Act, Banking Laws Act and others that I may have missed. Under the Bank of Guyana Act, section 36 states: “The Bank shall have exclusive responsibility for the supervision and regulation of licensed financial institutions under this Act and the Financial Institutions Act 1995.” Part VII of the Act which runs from section 36 to 43 provide for “Relations with banks and other financial institutions” which provides wide powers for the Bank of Guyana.
The reserve held by the Bank of Guyana was recently in the news. The power to maintain this reserve is given by section 41(1) of the Act which states: “The Bank may require licensed financial institutions which accept deposits to maintain minimum balances with the Bank as reserves against their deposit and other liabilities.” The reserve, has reportedly reached one trillion dollars and no avenue exists for these funds to be invested for the benefit of their owners, which has now been promised, which we anxiously await. It should be noted that one potential avenue is the stock exchange. But due to regulatory or legislative neglect, that institution also dwells in the stone age. In a roaring economy, stock prices have been declining for over a year without a word from anyone – the Government or the private sector – except Banks DIH in connection with its own share prices.
Under section 61 of the Act “the bank may make regulations as may be required from time to time for carrying into effect the provisions of this Act.” Under this section the Bank of Guyana has in place a large number of wide-ranging regulations which are called “Supervisory Guidelines.” Supervisory Guideline 1 was issued in March 1996. I have traced 15 Supervisory Guidelines, the last having been issued in January, 2024. Some of these are exceedingly large documents. The Supervisory Guidelines 13 issued in June, 2013, consists of almost 100 pages. As an example of the detailed instructions that the banks are required to follow, and about which many complain, is as follows: “Financial institutions need to obtain all the information necessary to establish to their full satisfaction, the identity of each new customer and the purpose and intended nature of the business relationship (personal, corporate etc) and the expected size of the account. For existing accounts, if problems of verification of identification and proof of address arise in the banking relationship the bank should terminate the relationship.”
Extensive requirements are provided for general identification requirements, verification of KYC (Know Your Customer) details, certification of identifying documents, specific identifying and verification procedures for natural persons (individual customers) and many others which run into dozens of pages that banks are required to observe. These are the onerous requirements that members of the public often complain about, and which are publicly taken up by government officials and the private sector, who should know about these statutory requirements, but instead, without informing themselves, lash out at the banks. The simple question many of them do not ask themselves, is why would a business deliberately make it difficult for its new of existing customers to do business with them when there are competitors whose business places are ten minutes away or less?
I was told by one Canadian person last year that he went into a bank and opened two accounts, one in Canadian dollars and one in US dollars. All he had was one identifying document and the process took one hour. Guyana needs such procedures but the Supervisory Guidelines prohibit them. The legislation which has been threatened in order to bring the banks out of the dark ages should have a long, hard, look at the Bank of Guyana’s Supervisory Guidelines. In any event many of these would have to be scrapped if the Vice President’s promise to create the possibility of Guyanese, at least in the hinterland, of being able to open bank accounts by telephone, ever materializes.