Guyana and the crucial Financial Sector Assessment Program
Last year, the Government requested the International Monetary Fund (IMF) to conduct a new Financial Sector Assessment Program (FSAP). Established in 1999, the FSAP is a comprehensive and in-depth assessment of a country’s financial sector.
FSAPs analyze the resilience of the financial sector, the quality of the regulatory and supervisory framework, and the capacity to manage and resolve financial crises.
Based on its findings, FSAPs produce recommendations of a micro- and macro-prudential nature, tailored to country-specific circumstances.
The FSAP is a key instrument of the Fund’s surveillance and provides input to the Article IV consultation. In jurisdictions with financial sectors deemed by the Fund to be systemically important, financial stability assessments under the FSAP are a mandatory part of Article IV surveillance, and are supposed to take place every five years; for all other jurisdictions, participation in the program is voluntary.
In developing and emerging market countries, FSAPs are conducted jointly with the World Bank. In these countries, FSAP assessments include two components: a financial stability assessment, which is the responsibility of the Fund, and a financial development assessment, which is the responsibility of the World Bank.
Furthermore, IMF mission conducted the actual financial sector assessment in May. The Government has made it clear that it is committed to supporting the development of the financial sector and promotes financial inclusion.
In the meantime, there have been a number of changes in Guyana’s financial sector since the 2006 FSAP.
The authorities here have since brought insurance companies and the New Building Society (NBS) under the supervision of the Bank of Guyana (BOG).
In order to promote financial inclusion and deepen the financial sector, the Ministry of Finance said that the BOG has begun to license money service operators located outside of Georgetown, to facilitate businesses and individuals who reside in rural areas.
Also, as part of the financial consumer protection initiative, the Ministry said that the outreach of the National Financial Literacy Program has been broadened.
The authorities are also assessing the feasibility of agency banking to allow local non-banks to provide some financial services in rural communities and will promote the expansion of mobile banking.
The BOG is currently moving towards Basel II implementation and intends to move to Basel III in the near future, to strengthen the regulatory framework and align banks’ capital requirements with internationally recommended best practices.
In addition, through the Financial Sector Reform and Strengthening Initiative (FIRST) of the World Bank, the BOG is receiving technical assistance to strengthen supervision of the non-bank financial institutions and insurance companies.
The initiative aims to close gaps in the supervisory perimeter, regarding prudential and non-prudential standards, and to build supervisory capacity, as well as facilitate the development of a legal and institutional framework for market conduct and financial consumer protection.
The BOG is currently in the process of rolling out a deposit insurance guarantee scheme. The authorities plan to pass the revised draft insurance act by end-2016, which was prepared with technical assistance from the World Bank and is intended to correct regulatory and supervisory failures that were highlighted by CLICO’s bankruptcy.
Furthermore, the authorities continue to cooperate with the Financial Action Task Force (FATF) and the Caribbean Financial Action Task Force (CFATF) to fully comply with all outstanding deficiencies related to its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime and become compliant with the FATF Revised Recommendations.
Last year, the National Assembly passed legislation and guidelines on terrorism and terrorist financing and have fully satisfied five of the eight elements of the Action Plan and partially satisfied the remaining three.
In December 2015, Guyana also passed further amendments and regulations, including guidelines on freezing, unfreezing and providing access to frozen funds.
Also, the Financial Intelligence Unit is being restructured, to streamline the functions with those specified in the FATF Recommendation. The Government has also initiated a National Risk Assessment Exercise with technical assistance and guidance from the World Bank.
The outcome will facilitate the implementation of appropriate risk management and risk mitigation policy strategies.
The de-risking phenomenon continues to be a source of concern for the authorities.
However, while they agree that the current AML/CFT framework needs to be further strengthened – the deficiencies are expected to be rectified by the end of June 2016 – they wish to highlight that this does not guarantee that there will be a resolution to the issue. The Government continues to call on the Fund to play a more active role in finding a solution and addressing the needs of its membership.