The Bank of Ghana has granted approval to 11 out of the 23 banks in the country to pay dividends to their shareholders for the 2020 financial year.
According to the Bank of Ghana, the rationale for the approval of some of these banks is to prevent any pressure on the cedi and the economy as some of these payments will go to investors outside the country.
Meanwhile, some major banks including Ecobank Ghana, GCB Bank and CAL Bank have started paying dividends to their shareholders.
Meanwhile, the Deputy Head of Banking Supervision at the Bank of Ghana, Ismail Adam, explaining why the Bank of Ghana has to put a hold on hold payment of dividends for some banks, noted that the decision by the Bank of Ghana was to build robustness in the banking sector, post COVID-19.
“The idea is to make the institutions [banks] more robust and resilient such that they wouldn’t suffer because of the pandemic [COVID-19]. So one of the main things we did was to say that we are putting a hold on payment of dividend so that we build enough capital to withstand the shocks that will emanate from the pandemic.
“But it was not cast in stone. We also said that if you [banks] are meeting certain requirements as we said you will be allowed to pay dividend. So as we speak, 23 banks that we have, I think 11 of them which is almost 50% have been given approval to pay some dividend”.
Moreover, Mr Ismail Adam urged the banks to remain calm as the Bank of Ghana has put in measures to address the situation.
“From our interaction with the board, the issue came up and yesterday. I think I made that point somewhere, some [banks] were even threatening to take us to court for infringing on their rights under the Companies Act”.
BoG Announced Strict Measures on Payment of Dividend by Banks
It can be recalled that due to the devastating effects of the COVID-19 pandemic on businesses, the Central Bank introduced some regulatory measures that include the financial institutions meeting certain key requirements before they could pay dividend to shareholders.
The central bank said in a statement that banks wishing to pay dividend for the 2020 and 2021 financial years must show proof of Capital Adequacy Ratio of 13%, cash reserve ratio of 10% and non-performing loans (NPL) ratio of below industry average at all times.
The regulator directed that a prospective dividend paying bank must also comply with the relevant provisions of the Banks and Specialised Deposit-Taking Institutions (BSDI) Act, 2016 (Act 930) on dividend payments, submit its audited financial statements to BoG as well as have no restrictions imposed on its operations by the central bank by way of Prompt Corrective Actions (PCAs) as per Act 930.