Guyana’s Financial Institutions Face Tough Capital Requirements
The Bank of Guyana has introduced new capital requirements for licensed financial institutions in a bid to strengthen the country’s financial sector. According to Section 17 of the Financial Institutions Act Cap. 85:01, financial institutions that accept deposits of any type must maintain a minimum capital base of not less than $250 million.
Meeting Capital Requirements
The capital requirement can be satisfied through various means, including:
- Keeping capital on deposit with the Bank or a correspondent bank approved by the Bank
- Investing in foreign government securities
- Purchasing marketable obligations issued by the Government of Guyana
- Providing capital in other ways permitted by the Bank
Risk-Weighted Capital Requirements
The Bank may elect to require financial institutions to calculate their total assets, contingencies, and off-balance sheet commitments on a risk-weighted basis to reflect the credit risks associated with these assets. This approach is in line with accepted standards of international banking supervision.
Changes to Capital Requirements
Financial institutions are required to submit applications to the Bank for approval before making any significant changes to their capital structure or business operations. The Bank will assess whether the acquiring person is fit and proper to acquire control of a licensed financial institution, considering factors such as:
- Their background
- Experience
- Integrity
- Financial resources and history
Penalties for Non-Compliance
Failure to comply with these capital requirements or other provisions of the Financial Institutions Act can result in severe penalties, including:
- Fines of up to $100,000
- Refusal to accept an application that does not contain all required information
- Specification of further procedures for implementation
Conclusion
The new capital requirements are designed to strengthen the financial sector and protect depositors’ interests. Licensed financial institutions must ensure compliance with these requirements to avoid penalties and maintain their licenses.