Ghana Fixed Income Market (GFIM) Report have disclosed that some eight banks may be hard hit by the country’s debt exchange program.
According to the Ghana Fixed Income Market report, the banks (four foreign and four local), whose names have been withheld, together controlled about 83.91% of the debt market share.
The Report disclosed that these banks traded a significant volume of bonds and bills on the bond market in the month of November 2022, despite a looming debt restructuring program. “The Debt Exchange may affect their liquidity position, but will depend on their balance sheet size,” it stated.
However, the Report further revealed that in the worse-case scenario beyond control, the four foreign banks may be salvaged by their parent companies.
GFIM Report also noted that, six leading investments banks are also highly exposed to government of Ghana securities. Together, they controlled 89.13% of the debt instrument market.
International rating agencies, Fitch and Moody’s, recently downgraded some banks operating in Ghana. They argued that the downgrade of the banks follows the downgrade of Ghana’s Long-Term IDRs as the banks’ standalone credit profiles are closely linked to that of the sovereign (Ghana).
“This reflects the concentration of their operations within Ghana, strong reliance on sovereign-derived income and high exposure to the sovereign relative to capital. The sovereign securities exposure is largely in local currency but the banks have moderate holdings of Ghanaian sovereign Eurobonds,” the rating agencies revealed.
Government Sets Up ¢15bn Stability Fund For Banks
During the announcement of the debt exchange program by the Finance Minister, Ken Ofori-Atta announced that, there has been an establishment of the Ghana Financial Stability Fund with a target size of ¢15 billion and with the aim of offering liquidity support to banks during the exchange program.
The Fund to be provided by the Government of Ghana and its development partners will provide liquidity to financial institutions that participate fully in the Debt Exchange
“All financial institutions (banks, SDIs, pension schemes, collective investment schemes, fund managers, broker/dealers, insurance firms) that fully participate in the Debt Exchange can access the GFSF for augmented liquidity support, with effect from the date of completion of the Debt Exchange.”
Finance Minister, Ken Ofori-Atta
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