BoG hopeful its 5 major decisions due to COVID-19 will lessen impact on financial sector

BoG hopeful its 5 major decisions due to COVID-19 will lessen impact on financial sector

Dr. Ernest Addison - Governor, BoG

The Bank of Ghana (BoG) says it is hopeful the proactive measures it has taken so far to protect the financial sector from a possible shock from COVID-19 will yield results.

In the latest banking sector report published by the central bank, it noted that it has taken 5 major decisions that will steady the financial sector against any burden from the coronavirus pandemic as well as protect depositors’ fund.

In the BoG’s report, it pointed out that the decision to lower Monetary Policy Rate by 150 basis points to 14.5 per cent is expected to reduce interest rates and help lessen the challenges in securing credit facilities at reasonable rates for individuals and businesses.

Also, the central bank is hopeful the reduction in Primary Reserve Requirements from 10 per cent to 8 per cent will extend and expand the coverage of channelling additional funds to support lending in all critical sectors of the economy including the informal sector.

Additionally, the Bank of Ghana is hopeful the reduction in prudential limit of Capital Adequacy Ratio from 13.0 per cent to 11.5 per cent will complement the reduction in primary reserves by helping to boost credit expansion to support the economy.

Furthermore, the report maintained that the reduction in provisions for loans in the “Other Loans Especially Mentioned” category from 10 per cent to 5 per cent could lessen the impact of the potential challenges of Non-Performing Loans on loan loss provisions and profit margins of banks.

And while the classification of loan repayments past due for Microfinance Institutions increased to 30 days as current, it will also help minimize the impact of loan repayment challenges on Microfinance Institutions.

While looking at possible measures to help strengthen cushion banks and customer in the pandemic, the Central Bank says it will ensure that the additional liquidity released from these policies do not move to invest in government securities and paying of dividends to shareholders.