Overview of the Legal and Regulatory Framework

The Bank of Guyana plays a pivotal role in the local financial system. When established in 1965, by the Bank of Guyana Ordinance, its principal objectives were set out in section 5 of the statute as follows-

Within the context of the economic policy of the Government, the Bank shall be guided in all its actions by the objective of fostering domestic price stability through the promotion of stable credit and exchange conditions, as well as sound financial intermediation conducive to the growth of the economy of Guyana.”

The expression of this mandate has remained constant. However, over the years the details of and functions related to the exercise of the Bank’s mandate have been elaborated and distilled through amendments to the Bank’s charter along with the enactment of several pieces of legislation which together form the legal and regulatory framework within which the Bank operates.

The Bank has supervisory responsibility for deposit taking (including commercial banks) and non-deposit taking financial institutions under the Financial Institutions Act 1995, money transfer services and dealers in foreign currency under Money Transfer Agencies (Licensing) Act 2009 and the Dealers in Foreign Currency (Licensing) Act 1989 respectively. The supervision of insurance business and pension funds plans, which were, prior to 2009, supervised by the Commissioner of Insurance also form a part of the Bank’s supervisory portfolio.

Given the importance of an efficient payment system to the functioning of the financial system and the wider economy, the Bank has responsibility for the oversight and regulation of the national payments system and also provides support for payments, clearing and settlement through the operation of the National Clearing House.

By virtue of its designation as a Supervisory Authority under the Anti- Money Laundering /Countering the Financing of Terrorism Act 2009, the Bank is entrusted with the responsibility of supervising compliance, by the reporting entities under its supervision, with the Act. Pursuant to the Credit Reporting Act 2010, the regulation and supervision of credit information sharing also falls under the purview of the Bank.

The Bank of Guyana Act 1998
The Bank of Guyana Act No.19 of 1998 which establishes the Central Bank as an autonomous institution includes provisions on the governance and administration of the Bank, relations between the Bank and licensed financial institutions and the Bank and the Government.

The Act also places the exclusive responsibility for supervision and regulation of licensed financial institutions on the Bank and tasks it with the responsibility of oversight of the payment system.

Part IV, which addresses the issue of governance and administration, makes provision for a Board of Directors to be the policy making organ of the Bank, with the Governor and Deputy Governor serving as Chairman and Deputy Chairman respectively. In 2004 this Part of the Act was amended with a view to enhancing and safeguarding the autonomy of the Bank.  Section 9 in particular was amended by -

  1. increasing the number of Directors;
  2. including the requirement that the offices of Governor and Deputy Governor be filled within a specified period of becoming vacant;
  3. requiring the specification of the contractual terms and conditions of appointment of the Governor, Deputy Governor and Banking Manager upon appointment. 

The Act was amended in 2018 to provide a detailed statutory basis for an Emergency Liquidity Assistance (ELA) framework and to explicitly allow the Bank to provide ELA. Temporary financial assistance is allowed to be granted to illiquid but solvent banks and other deposit taking financial institutions with adequate collateral for pre-established periods of 91days with one possible extension.

The Bank can also grant temporary financial assistance in systemic situations once the strict parameters and procedures indicated in the law are complied with. As solvency support should ultimately be the responsibility of the government there is the requirement for a guarantee to be granted by the Government in these circumstances. This would compensate for losses arising from the Bank’s solvency support in order to protect the Bank’s financial position/condition.

The Financial Institutions Act 1995
The Financial Institutions Act No.1 of 1995 which came into operation on the May 29, 1995 created the framework for the regulation of banking business and other financial business in Guyana.

This Act consists of nine parts which include requirements related to licensing of financial institutions, paid up capital, restrictions on banking and financial activities, supervision of licensed financial institutions and provisions for insolvency and winding up.

The Financial Institutions Act remained substantially unchanged since its enactment in 1995 until November 2004 when amendments were made by way of modification of some sections of the Act and the inclusion, in Part VIII of new emergency provisions dealing with temporary control.

Prior to the amendments in 2004, section 9 of the Act was amended in May 1996, to prohibit a deposit taking financial institution from acquiring another deposit taking financial institution.

The 2004 amendments sought to provide for the prevention of the abuse of financial institutions by insiders, enhance corporate governance and strengthen the powers of the Bank to deal with problematic licensed financial institutions.

The Financial Institutions (Amendment) Act 2018 repealed Part VIII of the Act “Insolvency and Winding Up” and replaced it with Part VIII “Resolution of Licensed Financial Institutions” This amendment introduced a more efficient administrative procedure as against the court administered one which has proved to be protracted, resulting in loss to depositors and shareholders.

The key purpose of the new regime is to enable an orderly resolution of a failing bank in a manner which preserves public interest particularly by maintaining financial stability, preserving confidence in the banking sector, and protecting both depositors and taxpayers from unnecessary losses or costs. 

The importance of the implementation of this process which begins with a preference for an orderly resolution is underscored by the introduction of the Deposit Insurance Fund which will take part as a last resort “creditor” participating in the asset and deposit transfers of failing banks. A Deposit Insurance Fund will only stay solvent and grow if it is not required to “pay out” during bank failures and can instead be a participant in a structured resolution process which is completed in a manner that minimizes resource outlays of the Fund.

The provisions of the Act are supported by subsidiary legislation, notices and supervision guidelines.

Dealers in Foreign Currency (Licensing) Act 1989
The Central Bank is also responsible for the licensing and supervision of dealers in foreign currency (cambios). Cambios are licensed to buy and sell foreign currencies. The Act originally gave the Minister of Finance the power to grant licences, renewable annually. In 1995 the Act was amended, transferring to the Bank of Guyana, in consultation with the Minister, full responsibility for administering the Act.

Supervision is conducted through on-site inspection and off-site monitoring of compliance with the Dealers in Foreign Currency (Licensing) Act and the provisions of the Anti-Money Laundering / Countering the Financing of Terrorism Act and supporting Regulations.  

Implementing regulations have also been passed under this Act.

Money Transfer Agencies (Licensing) Act 2009
This Act provides for the licensing of persons to carry on the business of money transfer as money transfer agencies, the ongoing supervision of such persons and other connected matters. A licensee may appoint a person, by agreement in writing, as a money transfer agent.

Licences and Certificates are subject to annual renewal, a precondition of which is compliance with the Money Transfer Agencies (Licensing) Act and the Anti-Money Laundering and Countering the Financing of Terrorism Act.

 Subsidiary legislation has been promulgated to facilitate implementation of the Act.

Anti- Money Laundering and Countering the Financing of Terrorism Act 2009
The Anti-Money Laundering and Countering the Financing of Terrorism Act 2009 which repealed and replaced the Money Laundering Prevention Act of 2000 according to the explanatory memorandum sought to provide for the prevention of money laundering, combating the financing of terrorism and the civil forfeiture of criminal assets.

The principal purposes of the Act as stated in its long Title are as follows:

“An Act to provide for the establishment and management of a Financial Intelligence Unit; to provide for unlawful proceeds of all serious offences to be identified, traced, frozen, seized and eventually forfeited; to provide for comprehensive powers for the prosecution of money laundering, terrorist financing and other financial crimes; and the forfeiture of the proceeds of crime and terrorist property; to require reporting entities to take preventive measures to help combat money laundering and terrorist financing; to provide for civil forfeiture of assets and for matters connected therewith”.

By virtue of section 22(1) of the Act the Bank is regarded as a supervisory authority with the responsibility of compliance oversight over entities specified in the Fourth Schedule referred to as reporting entities. The supervisory authority is expected to supervise compliance by reporting entities with the requirements of sections 15,16,18,19 and 20 of the Act.

Based on the Fourth Schedule the Bank has the responsibility of compliance oversight over reporting entities that carry on any of the following activities or businesses:

1) Acceptance of deposits and other repayable funds from the public;

2) Lending, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions;

3) Dealers in foreign currency, money exchangers e.g. cambios

4) Issuing and administering means of payment (such as credit cards, travelers cheques and bankers drafts)

5) Guarantees and commitments

6) Money Transmission services (by virtue of the enactment of the Money Transfer Agencies (Licensing) Act 2009

7) Insurance business, domestic and international   

As a supervisory authority the Bank is also responsible for and has issued guidelines for the entities under its supervision.

Credit Reporting Act 2010
The Credit Reporting Act was enacted in 2009 and places the responsibility for oversight and supervision of credit reporting on the Bank of Guyana. The development of an effective mechanism for the reporting of credit information that is accurate, relevant, fair and ensures the confidentiality of such information is pivotal to facilitating increased access to finance and contributing to the overall stability of the financial system. The Bank on August 13, 2013 licensed Credit Info (Guyana) Incorporated which has since operated as the sole credit bureau in Guyana.

Supervision is conducted through on-site inspection and off-site monitoring. The legislation also addresses the rights and protection of consumers. In addition to licensed financial institution the Act gives the Bank the power to designate other entities that grant credit as credit information providers.

The Credit Reporting Act was amended in January of 2016 with the objective of improving the efficiency of the system. The Act was amended by the Credit Reporting (Amendment) Act No.2 of 2016 to, inter alia mandate-

  1. i) That a credit information provider, as a component of its evaluation of the consumer's credit risk pulls a credit report from the credit bureau prior to the grant or renewal of credit facilities to the consumer.
  2. ii) That credit information providers share credit information with the credit bureau on all persons to whom credit facilities have been extended. The amendment removes the requirement for the consumer's prior consent.

iii) That the credit information provider obtains the prior written consent of a consumer which must be produced when a request is submitted to the credit bureau for information on the consumer.

  1. iv) That entities considered to be public sources, including utility companies share credit data or credit information which is publicly available.

 

The Insurance Act 2016 
The Insurance Act 2016, repealed and replaced the Insurance Act of 1998 and the Insurance (Supplementary Provisions) Act 2009. The latter Act had paved the way for the Bank of Guyana, instead of the Commissioner of Insurance, to administer the Insurance Act 1998. It had then transferred all of the functions assigned to the Commissioner of Insurance by any law or Court order to the Bank. Notwithstanding, the repeal of the Insurance Act 1998 the provisions of Part XVI (relating to Pension Fund Plans) of the Act were saved.

The Act was brought into operation on April 16, 2018 with the exception of sections 59,60,61,62,63 (f), (g), (h), (i) and (j)and 64 which shall come into force one year after April 16,2018.

The 2016 Act, which enhances the supervisory powers and responsibilities of the Bank and also provides for a risk-based approach to the supervision of insurance in Guyana, the promotion of competition in the insurance industry and the protection of consumers, is supported by comprehensive implementing Regulations. These Regulations were promulgated and gazette on April 17, 2018.

The Act provides a consolidated legal framework for the prudential supervision of insurers and satisfies various policy objectives by enhancing –

  • The regulatory framework;
  • The financial soundness of insurers and the protection of policyholders through a new Solvency assessment and Management (SAM) regime; and
  • Providing an introductory framework for insurance group supervision; and its alignment with international standards and best practices, custom made to emerging Guyanese circumstances in the “post Clico debacle” period.

The Act was amended in July 2018 to reinstate Parts XX, XXI and XXII of the 1998 Act as substantive parts of the 2016 Act. These provisions were inadvertently omitted because it was then intended to be incorporated into the supporting subsidiary legislation. These provisions are important as they will enable a policyholder to designate either his personal representative or a named person to be his beneficiary under the life policy and to alter or revoke such a designation at any time by a declaration in writing save and except where the designation is irrevocable. That designation may be made either at the time of effecting the policy or at any time thereafter. This is an important departure from the legal position under the Married Person’s Property Act which requires contemporaneity, i.e. that the designation should be made at the time when the policy was effected if the statutory trust was to be effective.

National Payments System Act 2018
The existence of a sound and predictable legal environment for payments is considered to be the basis for a sound and efficient National Payments System. According to Principle 1 of the Principles on Financial Market Infrastructure[1]  “a Financial Market Infrastructure should have a well-founded, clear, transparent and enforceable legal basis for each material aspect of its activities.”

Guyana's National Payments System Vision as articulated in the National Payments System Strategy 2018 is to:

Build a robust, safe and sound, efficient and inclusive National Payments System that meets the current and future needs of the economy, supports financial activity and financial sector development, advances the use of electronic payments, contributes to financial risk mitigation, achieves compatibility with international systems, and adheres to the relevant international standards, guidelines and codes.”

Building on the existing framework, the National Payments System Act, which creates a sound legal framework for the operation and oversight of the payments system in Guyana and facilitates its effective modernization, was tabled in Parliament in April 2018 and passed and assented to in July and August 2018 respectively.

The Act incorporates a comprehensive set of provisions on important aspects of the payments system. It defines the ambit of the “payments system” and articulates, in detail, the role and functions of the Bank in regulation and oversight of the payments system including the authority for regulating and overseeing activities related to processing, clearing and settlement.

The Act which will be supported by several pieces of implementing regulations.

Deposit Insurance Act 2018
The Deposit Insurance Act 2018 which seeks to provide protection of depositors’ funds establishes a Deposit Insurance Scheme for the protection of insured depositors comprising a Deposit Insurance Fund and a Deposit Insurance Corporation responsible for managing the Fund and other related purposes.

The Deposit Insurance Corporation is given a pay-box plus mandate, with functions and powers instrumental to the objective of fostering financial stability through depositor protection and resolution financing.

The Bank will play an important role in the establishment and functioning of the corporation as it is the sole subscriber of the capital of the Corporation and is vested with major Governance and co-operation responsibilities. The Governor will serve as Chairman of the Board. The Bank and the Corporation are mandated to share supervisory information on licensed deposit taking financial institutions.

This piece of legislation will be brought into force in 2019.