Bank of Guyana gets stronger legal teeth to deal with weak, failing financial institutions

Last Updated on Friday, 13 July 2018, 8:53 by Denis Chabrol

Minister of Finance Winston Jordan

Finance Minister, Winston Jordan has dismissed opposition claims that the strengthening of a raft of Guyana’s financial institutions laws is in exchange for a US$35 million soft loan from the World Bank.

“We don’t have to pass these Bills today to get thirty-five million. We already get it. It’s already been approved. We don’t have to pass these Bills today so I don’t quite understand anything that Sovereign Wealth Fund is a precondition to get thirty-five million,” Jordan told the 65-member National Assembly.

Jordan said the legislative amendments date back to 14 years ago when the recommendations were first made, and now given global experiences with several financial crises those were now being strengthened.

The amendments to the Financial Institutions Act empowers the Bank of Guyana to revoke the licences of financial institutions if they provide to the Central Bank false, misleading or inaccurate information in connection with an application for a license; ceases to carry on a banking or financial business in Guyana; fails to comply satisfactorily with any of the provisions of this Act or regulations made under that Act, which are applicable to the financial institution or any other Act to which it is subject to.

The Bank of Guyana.

“We are not waiting for a bank to fail tomorrow. We are putting in place legislation to deal with eventualities. We are not going to wait for a bank to fail. Our system is being increasingly integrated into the global system and with that come system risk and  cross-border risk. This is a reality we have to take into consideration,” he said. More than a decade ago, Globe Trust collapsed, resulting in steep losses to numerous depositors. Similarly, due to risks taken by Colonial Life Insurance Company (CLICO), the local branch failed and the National Insurance Scheme, which had invested in CLICO, and thousands of persons had lost millions of dollars.

While Jordan conceded to opposition frontbencher, Anil Nandlall that  Guyana got foreign assistance to draft the amendment to the Financial Institutions Act as had been the case over the years , the minister said the local Attorney General’s Chambers checked to ensure it was in line with the constitution and other laws. “I don’t see in this Bill where we have ceded one ounce of our sovereignty,” the Finance Minister said.

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Nandlall claimed that the amendments would essentially block the High Court from granting relief orders, but Jordan disagreed.

“This Bill has removed judicial scrutiny or has miniaturized  so what you have, Mr. Speaker, is a dangerous combination- a preponderance or concentration of power in the Central Bank and then the removal of judicial scrutiny from the Central Bank at the same time. Mr. Speaker, that is the kind of authoritarianism which exist in the government that is now being injected into the financial sector,” said Nandlall, a former Attorney General and Minister of Legal Affairs.

“I am taking their (Attorney General Chambers) assurances that there is nothing in here that limits the powers of the judiciary,” Jordan said in his response.

The former Attorney General suggested that the way the law is crafted opens up the possibility of a constitutional challenge because it constrains  financial institutions from seeking full legal redress.

Jordan accused the opposition People’s Progressive Party (PPP) of conspiring with several private sector organisations to block the tabling, debate and passage of the amendments. “There appeared to be an orchestrated attempt, possibly originating from within the opposition to  get certain private sector organisations to put pressure on the government,” he said, recalling that he had received a flurry of letters from sections of the private sector and the next day Nandlall’s letter appeared in the newspapers expressing concerns.

He noted that a June 27, 2018 request by the banking sector for a meeting with Attorney General, Basil Williams was later withdrawn on June 29, 2018 after the Guyana Association of Bankers said their concerns had been assuaged by Central Bank Governor, Dr. Gobind Ganga.

The Finance Minister said the Hand-in-Hand Trust, New Building Society, Republic Bank, Bank of Nova Scotia, Guyana Bank for Trade and Industry, Citizens Bank and Demerara Bank.