Debt exchange programme: GH¢15bn fund to cushion participating financial institutions
THE government is to establish a GH¢15 billion fund to provide liquidity to financial institutions that will participate fully in the Debt Exchange Programme (DEP) launched last Monday.
To be known as the Ghana Financial Stability Fund (GFSF), the fund is being established by the Government of Ghana and its development partners (DPs) as one of the avenues to cushion institutions that will be affected by the exercise.
A statement from the Financial Stability Council (FSC) said the fund would be available to all financial institutions, including banks, specialised deposit-taking institutions (SDIs), pension schemes, collective investment schemes, fund managers, broker/dealers and insurance firms that would fully participate in the programme.
It said qualifying institutions would be allowed to access the fund from the date of completion of the debt exchange to augment their liquidity support.
The statement said the fund would be managed by the Bank of Ghana (BoG) under unique operational guidelines being developed by the FSC.
The council said it would provide ongoing advice and oversight for the use of the GFSF.
It noted that regulators of the financial sector were already in discussions with external auditors of financial institutions and would provide guidance to ensure a standardised approach to the accounting treatment applied to the debt exchange.
The statement said stress tests had been conducted by the various regulators to estimate the potential impact of the debt exchange for banks, SDIs, insurance firms, asset managers, collective investment schemes, pension fund trustees and regulated pension schemes that could result from their participation in the debt exchange.
“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.
“Regulators will assess impacts on a regular basis and quickly address evolving risks in order to safeguard financial stability,” the statement said.
The council said in the statement that financial sector regulators were being supported to encourage their players to participate in the programme.
Among others, it said the regulators would temporarily reduce regulatory capital and liquidity requirements for regulated firms and schemes that voluntarily participated 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,” the statement said.
The statement said the council will continue to closely monitor the impacts of the debt exchange on financial institutions and 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.
The council was established in December 2018 by Executive Instrument to identify and evaluate the threats, vulnerabilities and risks to the stability of the financial sector.
It is chaired by the Governor of the BoG, Dr Ernest Addison, and has members from the central bank (Deputy Governor), the Ministry of Finance (Deputy Minister), the Securities and Exchange Commission (Director General), the National Insurance Commission (Commissioner), the National Pensions Regulatory Authority (Chief Executive Officer), and the Ghana Deposit Protection Corporation (Chief Executive Officer).