The Bank of Ghana has cautioned banks and Specialised Deposit-Taking Institutions to refrain from using the liquid funds from the reduction in the primary reserve from 10% to 8% to purchase Government of Ghana and Bank of Ghana Securities.

To contain the impact of the COVID-19 on the Ghanaian economy, the Bank of Ghana issued additional measures including  reduction of the Primary Reserve Requirement from 10% to 8% to provide more liquidity to banks and SDIs to support critical sectors of the economy and the reduction of the Capital Conservation Buffer (CCB) for banks from 3% to 1.5% to provide the needed financial support to the economy.

The rest are the reduction of provisions for loans in the “Other Loans Especially Mentioned” (OLEM) category from 10% to 5% for all banks and SDIs as a policy response to loans that may experience difficulty in repayments due to slowdown in economic activity, and loan repayments that are past due for Microfinance Institutions for up to 30 days to be considered as “Current” as is the case for all other SDIs.

But in a statement, the Central Bank said it has put in place monitoring mechanisms to ensure that these policy measures are effective in achieving their stated policy objective.

It will therefore monitor banks and SDIs’ financial dealings on a weekly basis, to ensure full compliance with the directives, adding, failure to comply with the notice shall attract sanctions in accordance with the relevant provisions of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

“Banks and SDIs are hereby advised to take note of the above and be guided accordingly”, it emphasised.

The policy measures include Banks and SDIs are to refrain from declaring and paying dividends or making other distributions to shareholders for the 2019 financial year unless the Bank of Ghana is satisfied that the institution meets the regular prudential requirements and is not relying on the additional liquidity released by the policy measures. Additionally, all banks and SDIs shall therefore seek the Bank of Ghana’s prior approval in writing before the declaration and payment of dividends.

Also, banks and SDIs are to desist from utilising the released liquidity based on the above policy interventions, to purchase Government of Ghana and Bank of Ghana Securities.