-restates that bank ‘highly liquid’
The Bank of Guyana (BoG) says that it authorized a temporary shortfall in the reserve requirement for the Guyana Bank for Trade and Industry (GBTI) in order to complete an approved transaction, and referred to its actions as “nothing irregular or unusual”.
A temporary shortfall in reserve balance may be allowed with or without any penalty at the discretion of the Central Bank, a press release from the BoG said yesterday. The bank said that such shortfalls are very isolated cases, noting that the shortfall approved for GBTI was reversed in two business days as authorized and agreed.
The Central Bank statement came in response to a guest business column by Robert V. McRae that appeared in the last Sunday Stabroek, in which the issue of the shortfall was raised. The column had stated that GBTI’s reserve requirement shortfall had increased within the past two years, and argued that this was a clear breach of the law because it represents an unauthorised advance to GBTI by the BoG.
The columnist said too, that the reserve requirement is a form of insurance for depositors, noting that its “negative excess” constitutes an arbitrary and unauthorised reduction by the bank which the BoG should not tolerate. The columnist said also that the BoG should have long instructed the bank to come into line, enforcing such penalties and interest as appropriate.
The BoG responding yesterday to the same article, said it had not been approached by GBTI for a ‘bail out’ as had been alleged on a blog earlier this year since the bank held and continues to hold adequate liquid assets and reserves.
It stated that from time to time, licenced financial institutions may approach the BOG or source among themselves overnight/ short term support to cover temporary cash requirement.
The BoG said that such support, particularly in its case, is carefully analysed and where approved is generally collateralized by marketable securities. According to the bank, transactions of this nature are normal between the central bank and licenced depositary financial institutions.
“The bank wishes to put this matter to rest by re-affirming that the GBTI is highly liquid and profitable and a well-managed financial institution”.
