BoG to sanction banks who misuse COVID 19 incentives

BoG to sanction banks who misuse COVID 19 incentives

Dr Ernest Addison - Governor, BoG

The Bank of Ghana (BoG) has said it shall not hesitate to sanction banks and Specialized Deposit-Taking Institutions (SDIs) that fail to efficiently utilize its interventions to increase their liquidity in containing the impact of COVID-19.

While these measures were aimed at increasing liquidity of banks and other SDIs, the central bank wants all banks to seek approval for the declaration or payment of dividends for the 2019 year, cautioning against the use of proceeds to pay dividends and other distributions to shareholders or purchase government of Ghana and Bank of Ghana securities.

Following the recent Monetary Policy Committee Meeting, the Bank of Ghana announced a series of measures aimed at dealing with the expected shocks that would hit the economy and improve liquidity in the wake of the pandemic.

Some of the measures

The reduction of the Primary Reserve Requirement from 10 per cent to 8 per cent to provide more liquidity to banks and SDIs to support critical sectors of the economy.

Again, the reduction of the Capital Conservation Buffer (CCB) for banks from 3 per cent to 1.5 per cent to provide the needed financial support to the economy.

Also, the reduction of provisions for loans in the Other Loans Especially Mentioned (OLEM) category from 10 per cent to 5 per cent for all banks and SDIs as a policy response to loans that may experience difficulty in repayments due to the slowdown in economic activities.

With regards to loans, repayments that are past due for Microfinance Institutions for up to 30 days shall be considered as “Current” as is the case for all other SDIs.

How will BoG Monitor?

The central bank said it will monitor to ensure that these directives are adhered to based on the following.

According to the Bank of Ghana, it will monitor the financial dealings of banks and Special Deposit-Taking Institutions (SDIs) weekly to ensure full compliance with the new directives.

“The Bank of Ghana shall monitor banks and SDIs’ financial dealings on a weekly basis, to ensure full compliance with the above directives,” a statement by BoG read.

Adding that, failure to comply with this notice shall attract sanctions under the relevant provisions of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).