Financial Liberalization and its Impact on Financial Stability in Guyana by Debra Roberts

Outline of Presentation Introduction. Pre- ERP Conditions. Post- ERP Conditions . Evaluation of the current regulatory framework. Conclusion and Recommendations.

Introduction Financial Repression and Financial Liberalization Repression Expansion of financial markets Washington Consensus policies promoted by the International Financial Institutions A condition to access technical and financial assistance from the IMF

Pre- ERP Conditions Government controlled approximately 80 percent of the banking system’s capital. Inadequate supervision Poor management of financial institutions Poor asset quality

Post – ERP Conditions Restrictions were eliminated No state-owned banks Financial Institutions Act 1995 – empowered BOG to regulate and supervise financial institutions BOG Act 1998 The presence of foreign banks

Current Regulatory framework Prudential Component –embraces the CAMELS approach / in line with BASLE recommendations. Regulatory Structure – organized along institutional lines Other Features – risk- based supervision, little macro- prudential analysis

Weaknesses Insufficient macro- prudential analysis Inter- agency coordination is absent Regulatory arbitrage Depositors are not protected. Globe Trust – deposit taking institutions CLICO - liquidated

Conclusions Financial Liberalization has strengthened financial stability The financial crisis highlighted new challenges. Need for additional reform to strengthen supervision

Recommendations Expand the coverage of regulated financial institutions. Foreign exchange exposures should be monitored Need for more macro- prudential analysis An integrated regulatory structure should be adopted Deposit Insurance / Consumer protection

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