Any intended liquidity support from the Bank of Ghana (BoG) to the financial sector must be extended to cover fund management firms and not only savings and loans or finance houses, economist and businessman, Dr Raziel Obeng-Okon has advised.
To improve liquidity within the Fund Management sector, Dr Obeng-Okon, said: “BoG should be encouraged by the Ministry of Finance (MoF) as part of the quantitative easing measure to purchase the current 5-Year zero-coupon bond to ensure that clients of financial services including fund management companies get 100 per-cent payment of their deposits and/or investments.”
The regulator is taking its authority from section 46A, of the BoG Act 612 which means the BoG can purchase bonds from Consolidated Bank, Ghana (CBG) or government and the proceeds could be used to provide liquid funds to pay fund management firms that invested in collapsed financial institutions regulated by the BoG.
Dr Obeng-Okon who is a lecturer at the Ghana Institute of Management and Public Administration (GIMPA) maintained that investment firms are a critical component of the financial system, noting that “solving the liquidity problem in the financial space must be holistic and all-embracing.”
Bank of Ghana formulates and implements monetary policy to achieve price stability, contribute to the promotion and maintenance of financial stability and ensure a sound payment system. To this end, BoG must be concerned with the activities of all players within the financial services space.
According to Dr Obeng-Okon, the collapse of seven banks, 386 microfinance institutions, 23 savings and loans, and the 53 Fund Management firms, had created loss of trust and confidence, fear and panic within the financial systems.
“It is a known fact that some of the existing BoG regulated institutions are suffering from liquidity crises and thus impacting negatively on the whole financial system,” he stated.
The Securities and Exchange Commission (SEC) in November last year withdrew the licenses of 53 fund management companies, saying the affected companies had failed to return client funds which remained locked up in contravention of the investment rules.
“Essentially, they have failed to perform their functions efficiently, honestly and fairly and in some cases are in continuing breach of the requirements under relevant securities laws, rules or conditions, despite opportunities provided to them by the SEC within a reasonable period of time to resolve all regulatory breaches,” a statement issued by the regulator said.
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