Enhancing Credit Monitoring Systems for Banks in Guyana: Liquidity and Reserve Requirements within the Banking System

This study evaluates the effectiveness of credit monitoring systems and the adequacy of reserves liquidity and provisioning requirements within Guyana’s banking sector. Effective credit risk management is critical in modern financial systems, particularly in light of global concerns regarding problematic debt. Consistent with principles advanced by the Basel Committee on Banking Supervision (BCBS), the research assesses whether banks in Guyana adequately monitor individual credit exposures and maintain sufficient provisions to mitigate potential losses. Using a mixed-methods approach—including literature review, interviews, questionnaires, and field observations—the study examines regulatory oversight by the Bank of Guyana and compares domestic credit risk practices with international standards. It also analyzes trends in financial sector growth and shifts in risk appetite amid Guyana’s rapidly expanding oil-driven economy. Key findings show a significant improvement in asset quality, with non-performing loans (NPLs) declining from 13.98% in 2016 to 3.57% in 2023. This reduction coincides with strong growth in performing loans, largely driven by economic expansion linked to the oil and gas sector. As of December 2023, the banking system remained highly liquid. Average liquid assets exceeded statutory requirements by 81% (G$148.8 billion). Licensed Deposit-Taking Financial Institutions (LDFIs) held G$332.6 billion in liquid assets, reflecting a 15.4% increase over December 2022. While this indicates financial strength, it also suggests excess liquidity potentially stemming from a conservative lending approach. Although banks utilize established credit assessment tools—such as CAMPARI, 4M Risk Analysis, credit scorecards, and SWOT analysis—challenges remain in regulatory enforcement, technological modernization, automation, and institutional capacity. An overly cautious lending stance may constrain credit growth and limit broader access to financing. The study recommends adopting advanced credit scoring technologies, strengthening regulatory frameworks, enhancing automation and capacity-building initiatives, and improving debt monitoring systems. It also calls for a sector-based risk assessment approach and a review of policies restricting private sector foreign borrowing. Overall a balanced strategy that strengthens risk management while improving credit accessibility is essential to support Guyana’s continued economic transformation and financial stability.