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The Banking Sector in Guyana
Guyana has a wellestablished
financial
system consisting of
commercial banks,
a merchant bank,
trust companies,
insurance companies, credit unions, a
building society and a stock exchange.
The country’s six (6) commercial banks
are the more dominant players in the
local financial industry, three (3) of
which are locally controlled banks and
three (3) foreign controlled banks.
All commercial banks are licensed
to operate under the Financial
Institutions Act 1995, and the local
regulator is the Bank of Guyana, which
regulates the banks in accordance
with the principles set by the Basel
Committee on Banking Supervision. As
a consequence, all banks comply with
international best practices for bank
management. The Bank of Guyana’s
supervisory and regulatory rules and
norms are reviewed regularly and are
updated in the light of changing and
evolving circumstances. In general, the
more important rules constantly under
review relate to lending policy, capital
adequacy norms, credit concentration
issues, foreign currency exposure,
accounting standards and provisioning
requirements. The statutory minimum
reserve requirement for banks is set
at 12 percent of total deposits, while
the statutory liquid assets required to
be maintained in relation to deposit
liabilities is set at 25 percent of demand
liabilities and 20 percent of time and
savings liabilities.
Our banking sector can be regarded
as mature, with the two newest banks
starting operations in 1994 and the
other older banks having heritage
of between 40 to over 150 years.
The banks are well managed and
operate with sound risk-management
systems and corporate governance
Guyana Business 2010 | 60
structures, and together play a major
role in promoting economic growth
by the mobilisation of savings and its
channelling to productive areas.
At 31 December, 2008, the six (6)
commercial banks had total assets of
$232.7 billion, with liabilities of $208.0
billion and capital and reserves of
$22.7 billion. The total commercial
banks branch network has expanded
from 25 at the start of 2004 to 32 at the
end of 2008. The banks have relatively
strong capital bases and strict
provisioning requirements against
bad and doubtful debts as well as for
diminution in value of investments. All
banks have successfully achieved the
legal benchmark of 8.0 percent for the
Capital Adequacy Ratio (CAR), which
at the end of 2008, averaged 18.28%
for the banks.
The primary variable in the cost
structure for commercial banks’ is
interest rates on deposit and lending
products. For the local banking
sector, interest rates are market
determined, and these rates have
trended downward over the last five
years as a result of higher levels of
liquidity in the banking system. The
small savings rate, which was 3.46%
at the start of 2004, has declined by
31 basis points to 3.15% at the end of
2008, whereas the weighted average
lending rate of the commercial banks,
which was 15.58% at the start of 2004,
has declined by 318 basis points to
12.40% at the end of 2008.
Currently, the banks offer a wide
range of services and innovative
financial products to both individual
and corporate customers, including
savings and investment accounts,
short and long-term financing for
business development and expansion,
prepaid, international payment
systems, foreign trade support, foreign
currency trading, debit and credit
cards, payroll processing, telephone
and internet banking, safekeeping
and night depository, among others,
within which some banks have carved
out niche markets, where they hold
some form of competitive advantage.
The major economic sectors to which
banks provide financing are rice
farming, construction, forestry, mining,
fishing, manufacturing and retail and
wholesale distribution, housing and
transportation.
Today, the local banking sector
exists within the reality of a radically
transformed financial system,
driven by globalization and financial
innovation, such that the proliferation
of financial innovations has blurred
the distinction between traditional
banking and other forms of financial
intermediation. Importantly, however,
our banking sector has remained
largely unaffected from the pitfalls
of such radical transformations given
the slower pace of our financial sector
development and the predominant
conservative culture of our banks.
In looking to the future, the local banks
aim to offer their customers greater
electronic options for conducting
their banking business, including an
interconnected ATM / POS network,
while improving service delivery
through enhanced process automation.
The local Bankers Association is
active and works to ensure a safe,
vibrant and competitive banking sector
through the fostering of a collaborative
approach, along with pursuing public
education that will enhance the well
being of consumers within the banking
community.
For further information contact:
The Guyana Association of Bankers
c/o Guyana Bank for Trade & Industry Ltd
47-48 Water Street, G/Town.