BoG launches guidelines for ‘repurchase agreement’ in Ghana

Governor of the Bank of Ghana, Dr Ernest Addison launching the guidelines on the sidelines of the IMF/World Bank Annual Meeting in Washington DC

The Bank of Ghana (BoG) has launched a new guideline that would help better regulate the purchase of government securities like treasury bills, bonds, notes and Eurobonds.

The Repurchase Agreement launched on the sidelines of the IMF/World Bank Annual Meetings in Washington DC is expected to give some legal framework and “comfort” to investors that actively participate or buy short term government papers, notes and bills.

Ghana is the third country in Africa to put in place these structures and regulations to oversee the repurchase of Agreement and trading.

These guidelines, according to the Bank of Ghana have been developed in consultation with key market stakeholders in the financial sector namely: Ghana Fixed Income Market (GFIM), Central Securities Depository (CSD), with technical support from International Capital Markets Association (ICMA) and Frontclear. This would oversee repo and repurchase agreement in the country.

Launching the guideline in Washington DC, Governor of the Bank of Ghana Dr Ernest Addison noted that the agreement if properly structured “can be become an effective vehicle for monetary policy transmission process and help the Central Bank act more swiftly as a lender of last resort during periods of market stress”.

“Repo markets also foster price discovery by facilitating primary market activity”, The Governor of the Bank of Ghana noted. He said, “We should also realize that the excessive use of repos can facilitate the buildup of leverage and encourage the over-reliance on short term funding, adding that “It is against this background that we are launching a GRMA-based repo market in Ghana to promote legal certainty on the enforceability of netting arrangements.”

Dr Addison disclosed that a takeoff launch is expected to happen in Accra on November 12 this year, “It is our expectation that these guidelines will provide the required boost in creating a vibrant, liquid and transparent bond market in Ghana” he added. The Governor also revealed that “As of August of 2019, the stock of repos and reverse repos outstanding between the Bank of Ghana and the commercial banks in Ghana was equivalent to US$350 million”

Speaking at the program, the First Deputy Governor of the Bank of Ghana Dr Maxwell Opoku Afari also added that, “adoption of these guidelines I believe will not only ensure legal certainty and enforceability but will also improve market transparency, liquidity […]

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