Debt Exchange: Financial sector regulators to ensure stability – Financial Stability Council

To safeguard the integrity of the financial sector and minimise risks associated with the recently-announced Debt Exchange Programme (DEP), sector regulators will “deploy all regulatory and supervisory tools to mitigate risks to financial stability”, the Financial Stability Council has disclosed.

In a communiqué dated Wednesday, December 7, 2022, the council indicated that it will initially employ a three-pronged strategy and make adjustments whenever they are required.

The measures include regulatory forbearance on liquidity and solvency, standardisation of accounting treatment to be applied regarding the DEP, as well as the establishment of the Ghana Financial Stability Fund (GFSF) earlier announced by the Finance Minister, Ken Ofori-Atta.

“Financial sector regulators will temporarily reduce regulatory capital and liquidity requirements for regulated firms and schemes that voluntarily participate in the debt 0peration,” the statement read in part, adding that respective watchdogs will, in addition, suspend or delay any new rules that will have an adverse impact on liquidity or solvency.

The GFSF, which is being established with collaboration from development partners, is targeting to raise at least GH¢15billion and will be limited to institutions “that participate fully in the debt exchange”.

The fund will be managed by the Bank of Ghana under unique operational guidelines being developed by the council, which will also provide guidance and oversight for the use of the GFSF.

“In keeping with its mandate, the Financial Stability Council will continue 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,” the statement said.

To guarantee maximum efficacy and protect the stability of the domestic financial system, these measures will be regularly evaluated and adjusted as necessary, it added.

Financial Stability Council

The Financial Stability Council was established in the wake of the sector cleanup to “identify and evaluate the threats, vulnerabilities and risks to the stability of the financial sector”.

The council is chaired by the Governor of the Bank of Ghana and has as members, a Deputy Governor of the Bank of Ghana, a Deputy Minister of the Ministry of Finance, and the Director-General of the Securities and Exchange Commission (SEC).

Others are the Commissioner of the National Insurance Commission (NIC), the Chief Executive Officer of the National Pensions Regulatory Authority (NPRA) as well as the CEO of the Ghana Deposit Protection Corporation (GDPC).