Tag: BoG

The Bank of Ghana (BoG) received $71.5 billion in bids from dealers, businesses and banks that participated in its third forex forward sale.

This means the Central Bank got more in bids than the $25 million that it was willing to sell in its forward forex sale.

Based on the auction results, 49 bids came from banks and dealers that were looking for $47 million from the Bank of Ghana in seven days.

However, the Bank of Ghana is prepared to sell $10.5 million within a range of GH¢5. 37 and GH¢5.38 by accepting 10 bids. 30 Bids came from dealers who were looking for $18.5 million in 15 days, but the regulator was prepared to sell $9 million at a price of not more than GH¢5.43.

Dealers and banks that wanted dollars in 30 days, submitted bids worth GH¢5 million at a price of GH¢5.42.

Read:BoG building GHC1bn buffer against election 2020 Ernest Addison

For this particular auction, the Bank of Ghana accepted all the bids in terms of price and the amount that they are looking for. The central bank also accepted all the bids coming from dealers that wanted $500, 000 in 45 days.

From the results, it was clear that there is more market players wanted more dollars, however, Bank of Ghana was able to supply a limited amount.

The next auction would be done on 26 November 2019 and December 10 2016. The Bank of Ghana is looking at selling $125 million at the end of the auction results by the end of this year.

Structure of the auction

The Bank of Ghana, the Foreign Exchange Forward rate Auction is limited to 7-day, 15-day, 30-day, 45-day, 60-day and 75-day tenors starting on October 01, 2019 to December 2019.

The Central Bank also said, in addition to the auction guidelines, all Authorized Foreign Exchange Dealer Banks shall also comply with the provisions of the Code of Conduct for the Interbank Foreign Exchange market in Ghana.

Read:BoG to shore up reserves with $1bn Addison

Bank of Ghana on the forward auction

Speaking to JoyBusiness, the Head of Financial Markets at the Bank of Ghana, Stephen Opata noted that the initiative would help businesses plan for their forex needs.

He said, “It creates more certainty for clients for future FX needs and alleviates unnecessary pressure on the spot FX market”.

Mr Opata indicated that it is another window to provide foreign exchange to bank clients based on verified commitments.

He added that this move is an ongoing reform to streamline operations of the foreign exchange market.

According to the Bank of Ghana, it would issue a one week notice, before the sale of these forexes, for businesses and commercial banks.

Read:Address issue of high interest rates Akufo-Addo to BoG

This would also allow businesses and banks to plan properly for their forex needs; a development that would help reduce pressure on the spot market.

Mr Opata added that after the first forward auction on October 1, the regulator plans to come out with a calendar for further sales.

Source: Myjoyonline.com

The method deployed by the Bank of Ghana (BoG) in the recent clean-up exercise was largely dependent on the root cause of what accounted for such banks to become insolvent, First Deputy Governor of the BoG, Dr. Maxwel Opoku-Afari has said.

Reports indicate that the BoG pumped in Ghc20 million daily to enable cheques of such banks to go through clearing, as their capital adequacy ratio was in negative and thus had to depend on life support. The capital injection was necessary as the central bank had to take pragmatic measures to ensure smooth running of the entire clearing and payment system.

Read: BoG maintains Monetary Policy Rate at 16% again

Instructively, the central bank has maintained that such occurrence prior to the revocation of their operational licenses defeat the argument and sentiments expressed by the public on the failure of BoG to rather institute effective and convenient measures to bail up such banks.

Some even noted that to ensure financial inclusion in the sector and protect businesses, the central bank had no option than to give monies directly to the banks to make them somewhat liquid rather than revoking their licenses.

Answering a question based on a similar sentiment expressed by one of the participants during the Ghana Industrial Summit and Exhibition (GISE) 2019 held in Accra last week, Dr. Opoku-Afari noted that the collapsed banks had their licenses revoked because they were operating fraudulently coupled with poor risk management.

“Some institutions take depositors money and give it to related party institutions without adhering to the laid down rules. There are rules as to how you can give loans to related businesses.

But if you break those rules and then syphon monies to these related institutions, do you think that to ensure financial inclusion, the BoG should pump more money into those banks? The best thing to do is to revoke their license to prevent it from spilling over to affect other strong institutions”, he queried and explained.

Read: BoG to sanction institutions pricing in dollars

Instructively, the net effect of the clean up exercise was necessary in the sense that it prevented disorderly collapse of the banking sector, the central bank maintains.

So far, out of a total Ghc10 billion spent to protect depositors funds from the collapse banks, the central bank has just managed to retrieve about Ghc849 million, representing a paltry 8.4 percent.

The gathering was aimed at supporting industrialization and export competitiveness on a sound financial ecosystem organized by the Association of Ghana Industries.