BOG Issues Guidance for Banks on Capital Utilization During COVID-19
BOG published guidance on the utilization of capital and liquidity releases to banks and specialized deposit-taking institutions, in light of the COVID-19 crisis. Banks and specialized deposit taking institutions are expected to refrain from declaring and paying dividends or making other distributions to shareholders for the financial year 2019, unless BOG is satisfied that the institution meets the regular prudential requirements and is not relying on the additional liquidity released by the policy measures to pay shareholders. All banks and specialized deposit-taking institutions shall, therefore, seek prior approval from BOG before the declaration and payment of dividends.
Banks and specialized deposit-taking institutions should also desist from utilizing the released liquidity based on policy interventions, to purchase the securities of Government of Ghana and BOG. BOG shall monitor weekly the financial dealings of banks and specialized deposit taking institutions, to ensure full compliance with the directives. BOG has put in place this monitoring mechanism to ensure that policy measures introduced by BOG are effective in achieving their stated policy objective. Certain policy measures were introduced to enable banks and specialized deposit-taking institutions to provide more liquidity and financial support to critical sectors of the economy to mitigate the adverse impact of COVID-19 on the Ghanaian economy. The policy measures included:
- Reduction of the Primary Reserve Requirement from 10% to 8% to provide more liquidity to support critical sectors of the economy
- Reduction of the capital conservation buffer for banks from 3.0% to 1.5% to provide the needed financial support to the economy
- Reduction of provisions for loans in the “Other Loans Especially Mentioned” category from 10% to 5% for all banks and specialized deposit-taking institutions as a policy response to loans that may experience difficulty in repayments due to slowdown in economic activity
- Loan repayments that are past due for micro-finance institutions for up to 30 days to be considered as “Current,” as is the case for all other specialized deposit-taking institutions
Related Link: Guidance
Keywords: Middle East and Africa, Ghana, Banking, COVID-19, Dividend Distribution, Regulatory Capital, Credit Risk, CCB, Liquidity Risk, BOG
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
APRA to Extend Parallel Reporting Period Under ARS 331 and RRS 331Related Articles
APRA Finalizes Guidance on Management of Climate Change Risks
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
European Council Adopts Position on Digital Finance Package Proposals
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
PRA Proposes Rulebook Changes; BoE Extends BEEDS Testing Window
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.
EC Proposes New Measures Under Capital Markets Union Package
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
EBA Publishes Standards to Calculate Risk-Weights of CIUs Under CRR
The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).
FED Outlines Lending Conditions and Supervisory Activities in H1 2021
The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.
APRA Expects Boards to Strengthen Ability to Oversee Cyber Resilience
The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.
FSB Updates List of Global Systemically Important Banks
The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.
FASB Proposes Improvements to Credit Losses Standard
The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.
US Agencies Issue Statement on Crypto-Asset Policy Initiatives
US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.
