A long-awaited bill to bring the New Building Society Limited (NBS) under the direct supervision of the Bank of Guyana was yesterday laid before the National Assembly by Minister of Finance Dr. Ashni Singh.
The New Building Society (Amendment) Bill 2010, which had its first reading yesterday, seeks to provide for the licensing and supervision of the Society by the Bank of Guyana (BoG) primarily under the Financial Institutions Act 1995 (FIA), the Bank of Guyana Act 1998 and any other law, according to its explanatory memorandum.
Among the clauses is one which seeks to limit the power of the Society to acquire, hold and lease land and other property subject to provisions of section 15(3) of the FIA. Another clause is aimed at prohibiting the NBS from making loans to its members upon the security of their investing shares. According to the bill, an investing share is one issued to “holders of Save and Prosper and $5 Shares Accounts or other savings accounts that the Society may so create.”
Another clause sets out to modify the definition of a member to include only those members holding fully paid up investing shares and excluding persons below the age of 18 from membership of the Society. Other clauses include ones to clarify the role of the Society’s Board and delimiting its supervisory authority; another to increase the amount of funds in the Society which can be released upon death without letters of administration; and one to increase the fine to $50,000 for any person paying or accepting a gift, bonus, commission or benefit in connection with a loan or shares purchase transaction.
Additionally, one amendment seeks to fix the requirement for the convening of a special general meeting to at least one-tenth of the membership and by increasing the period for convening the meeting to provide adequate time for verification and notification. The BoG Governor Lawrence Williams last year announced that they had already taken steps to bring the NBS under the direct supervision of the Central Bank, even as some “management issues” had been found.
Williams made the statement in a letter addressed to Cyril Walker, Chairman of the Concerned Members of the NBS, in response to concerns raised by that group.
The governor had said that the BoG had conducted several inspections of the NBS upon the authorisation of Dr Singh in keeping with the NBS Act. Williams added that the findings were communicated to the minister and the Chairman of the Board of Directors of the NBS.
“The findings of the inspections point to a healthy mortgage portfolio and general compliance with the NBS Act notwithstanding some management issues,” he had stated.
In a letter dated April 17, the group through its chairman, voiced concerns about the NBS not being licensed under Section 3 (2) of the Financial Institutions Act, which would have placed the Society under the supervision of the BoG and suggested that the NBS had taken advantage of this. The group said: “taking advantage of this failure to register, the society has been conducting its affairs in a manner that we consider dangerous to the members and the financial sector generally.”
The group had cited the example of the society’s $1.5 billion purchase of bonds in the Berbice Bridge Company from the financially troubled CLICO company. It said that such a purchase was “inconsistent with the Single Borrower Limit of the FIA but pointed out that “it may have been done in a manner that could be deemed inconsistent with the NBS Act and Rules.”