Banks will extend moratorium to December

Local commercial banks will extend moratorium services to its loan customers to the end of this year, President Irfaan Ali said in an address to the nation Wednesday evening.

“While being a global health risk, COVID-19 poses a serious financial threat. In our continued efforts to safeguard and strengthen the resilience of the sector, I have advised the Bank of Guyana (BoG) to examine a number of measures,” Ali told the nation. He said the Governor has since advised him that in consultation with the Guyana Bankers’ Association on a number of agreements.

Among the agreements are: the Bank of Guyana will extend the Moratorium to December 2020 to allow banks to further defer customer payments to end of December 2020 to cope with the lower revenue generation needed to meet operational needs. This accommodation will result in loans not being classified as non-performing and hence will not require loan loss provisioning.

The Bank of Guyana will also relax Sections 14 & 15 of Supervision Guideline (SG) No. 5 to December 2020. Additionally, a waiver is being given to Section 13 of Supervision Guideline No. 5. President Ali said the relaxation of stringent statutory measures is intended to result in direct benefits to customers of banks by giving the financial institutions the ability to operate with more flexibility.

The Bank of Guyana will also reduce Liquidity Requirements in two areas: lowering of the Reserves Requirement from 12 per cent to 10 per cent and lowering the Liquid Assets Requirement for: Demand deposits from 25 per cent to 20 per cent and Savings & Time deposits from 20 per cent to 15 per cent.
President Ali said these measures will result in overall increased liquidity in the financial sector. “The reduction in reserve requirements will result in the injection of G$9.4 billion and the reduction in the Liquid Asset Requirements will immediately release an estimated G$23.3 billion.”

Additionally, Ali said commercial banks 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 per cent to encourage businesses to remain open. “The current average short-term financing rate ranges from 8 per cent to 11 per cent, making this reduction a significant step towards promoting businesses continuity. Commercial Banks agreed to offer general concessional reductions of interest rates of 1 per cent and up to 2 per cent on consumer loans below G$10 million until December 31, 2020. The existing lending rate ranges between 6.5 per cent and 16 per cent.”
Ali said too that some commercial banks have agreed to apply special treatment to the interest accrued during the moratorium period including (but not limited to) no capitalisation, term extensions and forgoing of interest in special circumstances to loans with an outstanding balance of G$10M 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 system and financial architecture.