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Appendix 1. Details of Regression: Growth in Housing Price (Georgetown)
Appendix 2. Details of Regression: Growth in Housing Loans
The author would like to thank the Ms. Otker and Mr. McIntyre for a rich blend of ideas, comments and candid advice; all of which have benefitted this paper substantially.
Based on Engel-Granger test for cointegration Breusch-Godfrey serial correlation LM Test (Appendix 1).
The pace of growth (or rate of change) is computed as the second order derivative of the annual growth of housing prices.
In addition to commercial banks, nonbank financial institutions—such as the New Building Society, the Hand-in-Hand Trust Corporation, and credit unions—extend mortgage loans. Commercial banks account for about 70 percent of financial system total assets and originate two thirds of total real estate mortgage loans.
The BoG is in the process of implementing a hybrid approach to the Basel framework where capital definition and operational risk are based on Basel III while market risk and the standard approach to assessing credit risk are based on Basel II.
Research shows these indicators together can predict a crisis as early as two to four years in advance (IMF, 2011a).
See the BCBS consultative document (http://www.bis.org/bcbs/publ/d307.pdf) proposing a range of risk weights (from 25 to 100 percent) driven by LTV and DSTI ratios.
At present, commercial banks in Guyana do not lend in foreign currencies. If such lending is extended in the future, differentiated capital charges on FX-denominated loans should be considered, particularly when they lead to large currency mismatches and open FX position.