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Experts advise Banks to be innovative in absence of BoG’s guidelines on coronavirus measures

African Adaptations to the COVID-19 Response – Africa Center 


 Adnan Adams Mohammed

Commercial banks operating in the country have been advised to adopt innovative strategies as they wait for the Bank of Ghana to announce specific guidelines on the ‘new Coronavirus measures’ introduced.


The Central bank in March this year asked banks to reduce their interest rates and also announced a new reserve requirements to combat impacts of the COVID-19 pandemic. But, as to what percentage reduction the Central bank wants the commercial banks to effect, the actual levels of reserves required and the timelines are not known yet, leaving the banks indecisive.   


In the absence of these much awaited detailed guidelines, financial sector experts are admonishing banks need to capitalize on new opportunities and innovations to take decisions which guarantee their survival amid and beyond the pandemic.


“We are still not yet aware of how the whole impact is going to be, so we need to look at it in terms of how we prepare our banks to survive. How do we look at our operations to ensure that we are streamlining them to ensure we survive?”, Country Director for Deloitte Ghana, David Kwadwo Owusu, speaking in a live conversation on the Ghana’s Most Respected CEO’s Breakfast Series organised by the B&FT and held in Accra last week stressed, adding that, “they will have to consider liquidity management, risk management, and profitability strategies to survive the storm.”


Commenting on the theme ‘Bringing the Economy Back to Life: The Role of Banking and Finance’ he explained that, “Assurance comes with controls, risks and operational efficiencies. Now, we need to ensure we are looking at each of these aspects of our business, and that we are ensuring whichever decisions we take our banks and financial institutions will be able to survive this pandemic, and then deal with what is even ahead of us.”


Consequently, John Awuah, Deputy CEO of the Ghana Association of Bankers speaking at same event noted that, the association is urgently seeking the guidelines which are said to be in draft form and will be completed soon to give banks a better forecast.


“We are having discussions with the regulator and the guidelines are under preparation. Last time, the regulator said they are actually in draft and very soon we are going to have those guidelines. That will go to help us to operate, control and know that this is what we can do with the measures which the Governor has introduced,” Mr. Awuah said.


Explaining why the guidelines are urgent necessity, he added: “You know banks like to operate with certainty; and the measures, as good as they are, they were in a statement of ‘do this, do that, we have allowed this, we have allowed that’ but it didn’t come with any strict kind of confines – as in, ‘if you do this, this is the timeline before we analyse and take a decision’.


“We are expecting some guidelines as to what we can use the excess liquidity for. Yes, we are told that we can use it for lending, which is what banks have also taken on board; but we wanted to know the availability period. Let us say two years, or it is going to be available until such time we give you sufficient notice that it is no more going to be available? Additional guidelines would provide some more clarity around the funds,” he said.


The measures introduced by the central bank in March 2020 to reduce the negative impact of Coronavirus on the financial sector and economy include a reduction of the Primary Reserve Requirement from 10 percent to 8 percent, and reduction of the Capital Conservation Buffer (CCB) for banks from 3 percent to 1.5 percent.


Other measures include the reduction of provisions for loans in the ‘Other Loans Especially Mentioned’ (OLEM) category from 10 percent to 5 percent for all banks and SDIs, as a policy response to loans that may experience difficulty in repayments due to the slowdown in economic activity; and loan 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.


The Bank of Ghana also ordered banks and Specialised Deposit-Taking Institutions (SDIs) to suspend the declaration and payment of dividends or distribution of any reserves to shareholders, and for making any irrevocable commitments until further notice. Despite this directive, some banks have secured permission to pay dividends after making the case of holding enough reserves to support the economy when called upon.

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