After hours of debate, yesterday, the National Assembly passed a menu of Bills which are intended to strengthen the country’s financial architecture.
These Bills include the National Payment System Bill 2018, Deposit Insurance Bill 2018, and the Insurance (Amendment) Bill.
Finance Minister, Winston Jordan, explained that the Bills were as a result of the World Bank’s Financial Sector Assessment Programme (FSAP). The programme brings together the expertise of the World Bank and that of the International Monetary Fund (IMF) to help countries reduce the likelihood and severity of financial sector crises.
It provides a comprehensive framework through which assessors and authorities in participating countries can identify financial system vulnerabilities and develop appropriate policy responses.
The Finance Minister said, “The FSAP report came out and pointed to some deficiencies. The World Bank helped us to draft what was needed and corrected deficiencies (in some of our laws). This is being done to bring our banking system up to par with the rest of the Caribbean…”
NATIONAL PAYMENT SYSTEM BILL
This Bill seeks to introduce legislation for the establishment, regulation and oversight of a National Payments System for Guyana and for matters connected therewith.
It provides for the establishment of the National Payments System Council and it sets out the general powers and duties of the National Payments System Council. It also lays out the operational role of the Bank in relation to the National Payments System Council.
The Bill also paves the way for the licensing of payment service providers and systems operators.
With this document, the Bank of Guyana is given the power to impose individual conditions for the operation of systems and the provision of services, ask for information, and agree with the individual operator or payments service provider on limitations in the activity or specific protective measures or impose sanctions and withdraw the relevant licence.
INSURANCE (AMENDMENT) BILL
This Bill seeks to amend the Insurance Act 2016, by the insertion of new Parts XX, XXI and XXII which address the areas of contracts for long-term business, protection of policies, and paid up policies, surrender values and non-forfeiture, respectively.
Part XX provides for various areas related to contracts for long-term insurance business. It provides that an insurer shall not enter into a contract for the purpose of long-term insurance business unless, at the time the contract is entered into or not later than seven days after the contract is entered into, the insurer serves on the other party to the contract a notice specifying the nature and type of policy and annexes a form of notice of cancellation for use by the other party to the contract.
The Bill makes it an offence for an insurer to contravene this provision, however, this contravention does not invalidate the contract. In addition, the Bill provides for the manner in which a person may serve a notice of cancellation on the insurer.
Part XX also provides that an insurer shall not issue any policy under Type A of Schedule 2 to the Act unless the rate of premium chargeable under the policy is approved by its actuary. Clauses 266-268 of Part XX provide for matters related to proof of age in respect of policies including the procedure to be adhered to should a company decline proof of age tendered in respect of a policy and also the effects of a misstatement of age and non-avoidance of a policy due to such misstatement.
Clause 269 provides for the circumstances under which a minor may effect a policy upon his own life or that of another or take an assignment of a policy. It provides that a minor who has attained the age of ten years but has not attained the age of sixteen years may effect a policy or take an assignment of a policy with the written consent of his parent or a person standing in loco parentis to the minor.
The Bill also addresses the circumstances under which a minor who has attained the age of sixteen years may do so.
DEPOSIT INSURANCE BILL 2018
This Bill seeks to establish a Deposit Insurance Scheme and to lay out a regime governing its core elements – the Deposit Insurance Corporation and the Deposit Insurance Fund.
Given that deposit insurance is one of the components of the financial sector safety net, alongside supervision, resolution, and emergency liquidity assistance, this Bill seeks to address the inherent instability of maturity transformation in the banking sector.
This is in relation to the financing of long-term assets through the issuance of demand or short-dated deposits, which makes banks vulnerable to depositor runs and to contagion from less sound institutions.
The Bill notes that the advent of deposit insurance has proven to prevent major banking crises in the world over and plays a central role in maintaining financial stability.
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