House passes Financial Institutions (Amendment) Bill to strengthen Central Bank powers …Opposition contends it is toxic with opportunities for political interference

Jul 13, 2018 News

By Kiana Wilburg
The government’s one-seat majority in the National Assembly was able to successfully pass yesterday, the Financial Institutions (Amendment) Bill. Minister of Finance, Winston Jordan, spoke at length about the importance of the Bill to the financial stability of the nation.
He said that the Financial Institutions Bill, together with four others on the Order Paper, is designed to modernize the nation’s financial architecture and anchor the financial stability of the country so that those in the system can be resilient and are able to withstand unexpected shocks or unwinding imbalances.
The Finance Minister explained that the Bill was a necessary recommendation of the International Monetary Fund (IMF) and the World Bank which conducted a Financial Sector Assessment Programme (FSAP) two years ago.
This programme was established by the two international bodies in 1999. It is done to help countries analyze the resilience of their financial sector, the quality of its regulatory and supervisory framework, and to understand and strengthen its 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.
Jordan noted that prior to 2016; such a test was done on Guyana in 2004. He pointed out that during that time; an FSAP report recommended that there be substantial changes to Guyana’s Financial Institutions Act.
Jordan said that the FSAP’s suggestions to improve the Act were instituted by the Jagdeo administration and the Bill, signed into law on November 30, 2004.
Jordan noted that the 2004 changes limited financial institutions to making loans or extending credit to any parent company or subsidiary; prescribed penalties to directors and officers for giving false information, allowed Bank of Guyana to help banks in financial distress etc. The Finance Minister said that these changes made the system revolutionary.
The Finance Minister bemoaned the fact that it was until a decade before another FSAP was done. He then gave a snippet of the findings of the 2016 FSAP report. Jordan said that the financial system is doing “reasonably well” but significant vulnerabilities remained.
According to the 2016 FSAP report, Guyana’s crisis management framework needs improving along with its deposit scheme. It also stressed the need for the Banks to engage in proactive responses to sectoral issues.
Jordan said that these are significant observations. To underscore the importance of the Bill, Jordan reminded of the Globe Trust and Investments Company fiasco.
Globe Trust began operating in April 1991 and was licensed in 1999 to conduct depository financial business with authority to engage in Trust business. However, in 2000 and again in 2001, a series of inspections by the Bank of Guyana found the institution to be in breach of the Financial Institutions Act.
Central Bank, with the intention to liquidate, seized the institution in September 2001. The Finance Minister noted however that the process to close Globe Trust was a lengthy one.
The economist noted that the Financial Institutions Act, which was amended with the help of the IMF and the World Bank, would remove such problems in the future.
While members of the political opposition are in favour of the modernization of the financial sector, they did not lend support for the Bill. This was reflected in statements made by Opposition Members, Irfaan Ali, Joe Hamilton, Juan Edghill and Anil Nandlall.
Edghill during his presentation said, “We accept and have high regard for international consultants that give us help but we must never seed out our sovereignty.
“We must never be slavish that we must do whatever is being told to us. We must decide in this House what is best for us. We agree that the financial architecture of this country, it must be modernized. But let us take the time to discuss these amendments so that we are not made to come back again and do more amendments. Don’t let us rush it.”
Former Attorney General, Anil Nandlall, remains convinced that the Bill would only seek to impose political will on those in the banking sector. He reminded of the issue where cambios were “threatened” to use government imposed rates of buying and selling, the failure of which would lead to the revocation of their licences.
Nandlall said, “This is the political control we are talking about because if they didn’t do it then their licences would be revoked. These bills are toxic, filled with political control and interference. There is no independence of Central Bank here…”
The Opposition Members also criticized the fact that the government was cutting and pasting the IMF’s and World Bank’s recommendations without giving careful thought to the effects it will have on the banking sector.
But in his wrap up on the Bill, the Finance Minister categorically disagreed with the points proffered by his colleagues. He stressed that there is no shame in receiving help from international institutions so that the banking sector can be on par with the rest of the region. He said that this was necessary since the Chambers of the Attorney General is overburdened.
Jordan said, “We don’t have the skill set needed to do the drafting of some of these Bills and this is no disrespect to the AG Chambers. They are doing a fantastic job too…But there is no shame in asking for help.”
The Members of the House then went through the various amendments to Sections of the Bill. It was put to a vote and subsequently passed.