Bank of Ghana launches new Repurchase Agreement to regulate the purchase of government securities, here's how

The guideline, according to the central bank will help better regulate the purchase of government securities like treasury bills, bonds, notes and Eurobonds.

This strategy was launched by the Governor of the Bank of Ghana, Dr Ernest Addison on the sidelines of the IMF/World Bank Annual Meetings in Washington DC.

According to him, the guideline is expected to give some legal framework and “comfort” to investors that actively participate or buy short term government papers, notes and bills.

Ghana has become the third country in Africa to put in place these structures and regulations to oversee the repurchase of Agreement and trading.

These guidelines, BoG said, have been developed in consultation with key market stakeholders in the financial sector namely: Ghana Fixed Income Market (GFIM), Central Securities Depository (CSD), with technical support from International Capital Markets Association (ICMA) and Frontclear. This would oversee repo and repurchase agreement in the country.

Dr Ernest Addison further noted that the agreement if properly structured “can be become an effective vehicle for monetary policy transmission process and help the Central Bank act more swiftly as a lender of last resort during periods of market stress”.

“Repo markets also foster price discovery by facilitating primary market activity”, he said.

Adding that “We should also realize that the excessive use of repos can facilitate the buildup of leverage and encourage the over-reliance on short term funding, adding that “It is against this background that we are launching a GRMA-based repo market in Ghana to promote legal certainty on the enforceability of netting arrangements.”

Dr Addison revealed that a takeoff launch is expected to happen in Accra on November 12 this year, noting that, “It is our expectation that these guidelines will provide the required boost in creating a vibrant, liquid and transparent bond market in Ghana.”

“As of August of 2019, the stock of repos and reverse repos outstanding between the Bank of Ghana and the commercial banks in Ghana was equivalent to US$350 million,” he added.