Banks face increasing costs and changes to their software to comply with a slew of amendments to financial and business legislation, according to the Chairman of the Guyana Bank for Trade and Industry, Robin Stoby SC.
In his Chairman’s address in the bank’s annual report for 2016, Stoby said the amendments and new regulations have been “pushing up operational and compliance costs to record levels – costs that in the main have not been previously passed on to our customers”, he said.
GBTI’s AGM is to be held on May 22 at its headquarters in Kingston.
Discussing the local banking environment, Stoby said that compliance with the law amendments has not only become costly but entails an increasing number of changes to banking software to enable reporting to a larger number of regulatory bodies.
He said that banks are now being called upon to discharge varied tasks such as monitoring the activities of customers, collecting systematically and sharing information on certain customer transactions with law enforcement authorities and ensuring that its products and services meet a range of new standards.
“We are concerned that the negative impact and perceptions of these new systems on small and large customers alike fall primarily at the feet of bankers and not at the doorsteps of the regulatory agencies from where they emanate, and we believe that this is an area that the banks in Guyana need to engage the Government in meaningful discussions so as to seek to maintain a proper balance in the financial system of Guyana”, Stoby asserted.
He welcomed government’s announcements favouring a type of agency banking and said that GBTI is prepared to offer its views as part of the consultations. He also lauded the steps taken by the Bank of Guyana for the modernizing of the National Payment System via electronic payments. He said that GBTI had joined with the other banks in adopting new cheque standards and utilizing cheque scanners in its operations. This “has halved the clearing time previously required to confirm cheques between banks”, he said.
Stoby also adverted to amendments passed in 2016 including to the Credit Reporting Act and the Anti Money Laundering/Countering the Financing of Terrorism (AML/CFT) Act which he said will have serious repercussions on the operations of commercial banks.
“Amendments to the AML/CFT Act prescribe new fines of between $5m to $15m, (and) imprisonment, for breaches of the Act by Bank employees. It also prescribes ongoing training for employees to better detect suspicious transactions and the adoption by banks of methods for dealing with specific issues regarding originators of wire transfers. Amendments to the Credit Reporting Act prescribes that, as part of the credit risk evaluation, a Credit report must be obtained from the Credit Bureau before granting credit facilities to customers”, Stoby noted.
The GBTI Chairman also cited what he described as the “controversial provision” in the amended Income Tax Act granting authorization for the Guyana Revenue Authority (GRA) to demand that financial institutions remit funds from accounts held by taxpayers who have outstanding tax arrears to the GRA as such arrears are designated as debts to the state.
Local economy
In his review of the local economy, Stoby lamented that while the January 2016 budget had raised hopes of greater financial flows to the economy from early government spending, this did not arise. He said that the construction sector which depended heavily on government business found that there were fewer contracts issued and the making of interim and final payments by the government remained an area of concern.
He noted that plans were unveiled to reorganize the sugar industry but were met with strong resistance from “the major opposition political party”, trade unions sections of the industry’s workers and other organisations.
“There remains significant concern regarding the industry, and the need to reduce its burden on the national treasury is a priority acknowledged by all stakeholders while at the same time recognizing the socio-economic significance of the industry to Guyana”, he said.
Alighting on the huge offshore oil discovery, Stoby said that the early estimates of Exxon Mobil’s Stabroek block is that it could have more than four billion barrels of oil which at current prices could yield more than US$200 billion.
“As such we applaud Government’s efforts to obtain the best expert advice and guidance in all areas of the industry, whether in the formation of contractual arrangements, industry standards, environmental regulations, financial arrangements and other forms of oversight, and moreso in the establishment and operation of a Sovereign Wealth Fund for the country’s portion of the oil revenues”, he said.
While recognizing the output from two large foreign-owned mines, Stoby underlined the role played by small miners. “…the important role that small miners play in the livelihood of communities and poor families necessitates that due attention be given to supporting their operations within reliable regulatory frameworks”. He also said that the industry requires careful monitoring to ensure that “all players comply with mining related environmental legislation and observe proper codes of practice”.
GBTI registered an after-tax profit of $2.032 billion for 2016, 1.5% above the previous year but it also saw loan impairment expenses of $899 million.
The bank will be holding its AGM under a cloud after recent revelations that it had been defrauded in March this year of $956 million. Gold dealer, Saddiqi Rafeek Mohamad Rasul has since been charged in this matter and placed before the courts. Some weeks after this incident, it was revealed that long-serving GBTI Chief Executive Officer, John Tracey had retired. There was no mention in the 2016 annual report that Tracey would be retiring.
