Bank of Guyana says financial sector adequately capitalized at Dec. 2008

The Bank of Guyana says that at the end of December 2008 the licensed financial sector was adequately capitalized with a capital adequacy ratio (CAR) of 15.34% which is well above the minimum requirement of 8%.

And the banking sector by itself had a CAR of 14.89%, indicating no impairment in the core capital comprising paid-up capital, share premium, retained earnings, and reserve fund.

The Bank of Guyana made this disclosure on Tuesday night in a press release in which it expressed its concern that “persons still continue to deliberately attempt to mislead the public on the health of the financial system.”

The BoG in seeking to “dispel the misrepresentations” reiterated its advisory by again providing a synopsis of the sector.

According to the BoG, the aggregate balance sheet of $252 billion for all the licensed financial institutions surpassed the 2007 aggregate by 15.27%, mainly on account of the 23.81% growth in loans and 20.22% increase in investments funded from deposit liabilities which grew by 11.7% over the previous year.

The release stated that investments accounted for 39.9% of the industry’s total assets at the end December 2008, while at February 19, 2009, the total foreign currency assets amounted to $83.7 billion, representing 33% of total assets and comprising foreign currency investments of $68.9 billion and foreign currency deposits of $14.8 billion.

Within an aggregate loan portfolio of $89 billion as at the end of December 2008, the BoG said, non-performing loans continued its slow but steady decline and at the end of 2008 accounted for 5.57% of total loans compared with an average 11% over the past two years.

Provision for loan losses after consideration of collateral covered 84.27% of the non-performing loans as at the end of December 2008, compared with the 59.99% coverage the previous year.

The BoG also noted that profit after tax recorded a 31.6% increase over the previous year’s performance to reach $5.629 billion.

Moreover, the BoG said, all the banks performed creditably with return on assets for the banking sector improving from 2.3% in 2007 to 2.4% in 2008, while return on equity was 20.8% in 2007 and 20.5% in 2008.
According to the BoG, the financial sector’s holding of liquid assets totaled approximately $123 billion at the close of 2008 and the banking sector continued to be very liquid and ended 2008 with liquid assets totaling $67 billion, representing 56% of total assets.

Reserves held with the BoG totaled $49 billion and represented 40.1% of the bank’s liquid assets, while treasury bills with a remaining maturity of three to less than three months accounted for 23.8% of liquid assets.

The BoG said further that the Boards of Directors of the commercial banks and the non-banks “have been exercising enhanced corporate governance practices and along with senior management have been very vigilant in the monitoring of their institutions’ foreign investments and have been putting contingency plans in place to deal with any adverse occurrences.”

Meanwhile, with respect to the Hand-in-Hand Trust Corporation Inc. the BoG said it had been informed that there is a direct exposure to Stanford International Bank which represents 9% of its total assets.  Hand-in-Hand Trust Corporation Inc. has since provided the BoG with an action plan “to address any impairment of its exposure to Stanford International Bank,” the release added.

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