President of the Guyana, Dr. Mohamed Irfaan Ali, on Wednesday, announced that in light of economic constraints caused by the COVID-19 pandemic, he has consulted with the Governor of the Bank of Guyana (BOG) on the way forward.
The Governor further consulted with the Guyana Bankers Association, which yielded several relaxations.
“The Bank of Guyana will extend the moratorium to December 2020. To allow banks to further defer customers payments to the end of December 2020, to cope with the low revenue generation needs, to meet operational needs,” President Ali said.
The deference will result in loans not being classified as non-performing and will not require loan loss provisioning. The Bank of Guyana will further waive Section 13 and relax Sections 14 and 15 of the Supervision Guidelines until December 2020.
“Additionally, a waiver is being given to section 13 of Supervision Guideline: number 5. The relation of stringent statutory measures is intended to result in direct benefit to customers of banks, by giving the financial institutions the ability to operate with more flexibility,” the Head of States outlined.
He noted that the Bank of Guyana will reduce liquidity requirements in two areas.
The reducing of the reserve requirements from 12% to 10%, the lowering of liquids asset requirements for demand and deposit from 25% to 20%; and saving and timed deposit from 10 to 15%.
“These measures will result in overall increased liquidity in the financial sector. The reduction in reserve requirement will result in the injection of $9.4Billion, and the reduction in the liquid asset requirement will immediately release an estimated $23.3Billion in the economy.”
Additionally, the President said that commercial banks have also agreed to continue supporting businesses with short-term working capital needs, to meet payroll and other short-term funding requirements at concessional rates, between 5-6%. This is expected to help to encourage businesses to remain open.
It was also disclosed that the current average short-term financing rate ranges from 8-11%, which makes the reduction a significant step towards promoting business continuity.
Commercial banks have additionally agreed to offer a general concessional reduction of interest rates of 1%, and up to 2% on customer loans below $10Million until December 30, 2020, while special treatment will apply to some services.
“The existing lending rate ranges between 6.5 and 16%. Some commercial banks have agreed to apply special treatment to the interest accrued during the moratorium period, including but not limited to; no capitalization, term extension, and foregoing of interests in special circumstances to loan with an outstanding balance of $10Million and below.
Commercial banks have agreed to waive all bank charges, especially ATM, local merchant charges; to encourage more out of bank transactions as well as charges for transactions by senior citizens. These measures will not affect the soundness of our banking systems and financial architecture.”
President Ali also told the nation that while the measures outlined are not intended to be a silver bullet for all the potential COVID-19 consequences; his Government is working to ensure that effective measures are implemented to sustain the Guyanese economy.