Local banks are not directly exposed to the fallout from the collapse of Lehman Brothers, which has filed for bankruptcy and the sale of Merrill Lynch and Co Inc to the Bank of America Corporation, but there could be trickle down effects on the local economy from the US financial crisis.
In a telephone interview yesterday, Governor of the Bank of Guyana (BoG), Lawrence Williams, told Stabroek News that following reports of the collapse of the two major financial institutions in the US and with major insurer AIG, looking for a bailout, the BoG yesterday conducted some rounds of inspection with the local commercial banks to see if they were directly affected.
It was found, he said, that local commercial banks were not directly exposed to the shocks emanating as a result of the collapse of Lehman. However, he said, it was still too early to speak about the trickle-down effects since the bank would place deposits with correspondents to facilitate payments for investment and those payments could be affected resulting in loss of income.
But Williams said he believed that would only happen if the current financial turmoil widened and affected correspondents.
In neighbouring Trinidad and Tobago, the governor of the central bank, Ewart Williams, was reported in yesterday’s Trinidad Express as analysing what the collapse meant because that country’s reserves were invested directly and indirectly through external managers in the United States with Lehman being one of them.
Lawrence Williams noted that Lehman Brothers and Merrill Lynch were investment banks and Guyana did not have the sort of reserves that T&T had to put in investment banks. “Ours are held at other places,” he said without disclosing where they are being held.
According to Reuters, countries that had so far escaped the year-long credit crisis largely unscathed, scrambled on Monday to quantify the potential losses after Lehman Brothers Holdings Inc filed for bankruptcy.
Reuters also said that the fall of the Lehman Brothers raised the risk of a deeper US recession that engulfed a broader swath of the global economy.
