The Bank of Guyana is about to be given the power to bail out commercial banks in financial troubles for a maximum of 182 days, to safeguard depositors’ monies similar to what happened 14 years ago at Globe Trust.
However, the opposition People’s Progressive Party (PPP) objected to the amendment to the Bank of Guyana Act, saying that it was turning the central bank into a player instead of a regulator.
In wrapping up the debate, Finance Minister Winston Jordan urged lawmakers to recognise that “this is not about politics; this is about the economy”.
Responding to claims by opposition legislator, Anil Nandlall that the role of the Bank of Guyana was about to be changed for the first time in the world, Jordan pointed out that Jamaica, Belize, United Kingdom, and Canada have emergency financing provisions in their banking laws.
“If we had it fourteen years ago, we would have saved Globe Trust and their depositors,” he said. The amendment to the Bank of Guyana Act allows for the Finance Minister to give a government guarantee for a temporary bailout.
He disputed opposition parliamentarian, Irfan Ali’s claims that the amendment had to do with a shortage of foreign exchange due to poor performance of the export sectors such as rice, sugar, bauxite and gold. In fact, the Finance Minister noted that there was excess foreign exchange in the commercial market.
Former Finance Minister, Carl Greenidge, who is now Minister of Foreign Affairs, told the House that a government guarantee would be required for the second round of assistance after the Bank of Guyana determines the maximum value of the collateral to safeguard itself through real property. “The guarantee does not constitute the incurring of debt as such,” Greenidge added. “The intention here is to avoid it from collapsing, even though it may be illiquid.
The House also debated legislation to establish an Deposit Insurance Scheme and Deposit Insurance Corporation to provide for the reimbursement to deposits to a maximum of GY$2 million per depositor. Jordan said the reimbursement would be made 30 calendar days after the High Court issues a winding up order.
The PPP endorsed the Bill to establish those Deposit Insurance mechanisms.
Changes in Guyana’s financial architecture this week by the passage of new laws and amendments to others are in keeping with recommendations by the International Monetary Fund in its Financial Sector Assessment Programme here.