A report released by the Central Bank’s Financial Stability Council (FSC) has elaborated on government’s initiative to lessen the potential impact of the debt exchange program on financial sectors.
The Government of Ghana launched Ghana’s Domestic Debt Exchange program, an invitation for the voluntary exchange of approximately GHS137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic. The Exchange excludes Treasury Bills in totality, notes and bonds held by individuals.
According to FSC Report, tests have been conducted by the relevant financial sector regulators to estimate the potential impact that could result from the participation of banks, specialized deposit-taking institutions (SDIs), insurance firms, asset managers, collective investment schemes, pension fund trustees and regulated pension schemes in the debt exchange program.
FSC Report as well disclosed that, to help manage the potential impacts of the Debt Exchange on the financial sector, financial sector regulators will deploy all regulatory and supervisory tools to mitigate risks to financial stability.
Not limited to that, the Report further stated that, the regulators will assess impacts on a regular basis, and quickly address evolving risks in order to safeguard financial stability. “This will be a means to support and encourage full participation of financial institutions in the voluntary debt exchange program,” it stated.
The Report touching on the Regulatory Forbearance on Liquidity and Solvency, revealed that, financial sector regulators will temporarily reduce regulatory capital and liquidity requirements for regulated firms and schemes that voluntarily participate in the debt operation. “Regulators will also suspend or delay any new rules that will have an adverse impact on liquidity or solvency. Each regulator will communicate more specific reliefs to its regulated firms/schemes in due course,” it stated.
GFSF To Provide Liquidity To Financial Institutions That Participate In The Debt Exchange Program
Bank Of Ghana FSC Report indicated that, the Ghana Financial Stability Fund (GFSF) is being established with a target size of GHC 15 billion to be provided by the Government of Ghana and its development partners. The Fund 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, effective from the date of completion of the Debt Exchange.
“The Fund will be managed by the Bank of Ghana under unique operational guidelines being developed by the Financial Stability Council. The Financial Stability Council will provide ongoing advice and oversight for the use of the GFSF.”
Financial Stability Council Report
In concluding, Financial Stability Council assured the public of its continuous effort to closely monitor the impacts of the Debt Exchange on financial institutions and on the financial system as a whole, as well as the effectiveness of the measures outlined above.
“These measures will be reviewed continuously and recalibrated as needed to ensure maximum effectiveness to safeguard the stability of our financial system and the protection of deposits, pensions, policy holders’ funds, and investor funds/assets.”
FSC Report
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