Enhancing Credit Monitoring Systems for Banks in Guyana: Analyzing Adequacy of Provisions and Reserves and Recommendations for Efficient Implementation

This study critically analyzes the existing credit monitoring systems and the adequacy of provisions and reserves in banks within Guyana, offering recommendations for efficient implementation.Effective credit risk management is vital in contemporary economies due to the significant volume of problematic debt held by financial institutions globally.The Basel Committee on Banking Supervision (BCBS) emphasizes the need for banks to monitor individual credits and determine the adequacy of provisions and reserves.This mixed-methods study uses substantial literature evaluation and primary data from interviews, questionnaires, and field observations.It examines how the Bank of Guyana, which regulates six commercial banks, applies its principles.The paper compares debt monitoring methods to Bank of Guyana risk structure directives and international norms.It also compares Guyana's financial industry growth and risk appetite.Key findings indicate a significant reduction in nonperforming loans (NPLs) from 13.98% in 2016 to 3.57% in 2023, coinciding with substantial growth in performing loans, attributed to the oil and gas industry's impact on Guyana's economy.While banks in Guyana utilize models such as CAMPARI, 4M Risk Analysis, Score Card, and SWOT Analysis for lending assessments, challenges persist in regulatory enforcement, technological limitations, and maintaining adequate provisions.The study proposes best practices including advanced credit scoring models, strengthened regulatory frameworks, automation, capacity building, and enhanced watchlisting of debts.The conclusion emphasizes the need for a diverse approach to improve the efficiency and stability of Guyana's banking sector, addressing regulatory gaps, integrating financial technology, ensuring adequate provisions, and enhancing capacity-building initiatives.