The risk management (RM) environment for banks in Guyana resembles closely the situation described in the literature on developing countries. Features in this group, such as inadequate differentiation among risks, zero rating of sovereign loans, and a false sense of comfort derived from high risk-weighted capital ratios, resonate in Guyana. Also common is the influence of macroeconomic factors (fiscal policy, fluctuations in commodity prices and the terms of trade, and a lack of economic diversification) on risk, as well as asymmetries due to inadequate borrower information, and delays and other difficulties in enforcing collateral claims. Other features of the Guyana environment are that (i) the country is only now shifting to Basel II; (ii) liquidity and market risks are not significant, nor is model risk or third party risk; (iii) Value-at-Risk (VaR) is not used commonly in domestic banks, and banks generally do not aggregate risks into a single measure of overall risk appetite; (iv) enterprise risk management (ERM) is conducted only in the foreign banks; and (v) there is little risk transfer activity through hedging.
Published Date: April 2020
Author: Michael DaCosta
Full Paper
APR
2020