Financial leaders confident of economic recovery

Key players in the financial sector are upbeat about the recovery of the broader economy in general, and the sector in particular, with a raft of initiatives outlined to ensure a successful return to the path of growth.

The Director-General of the Securities and Exchange Commission (SEC), Daniel Ogbarmey Tetteh, said his outfit is taking concerted measures to restore investor confidence and ensure market stability in the wake of recent challenges and opportunities within the domestic capital market.

Shedding light on the regulator’s strategies and initiatives to navigate the complexities of the post-Domestic Debt Exchange Programme (DDEP) era, he said: “The recent dynamics within Ghana’s domestic capital market reflect a complex interplay of economic challenges and innovation-driven opportunities. The SEC’s strategies and actions play a pivotal role in shaping the market’s trajectory. Our strategies revolve around strengthening investor education, promoting market professionalism, refining regulatory oversight, and exploring safety nets within a transparent framework”.

Touching on lessons from the DDEP in an exclusive interview with the B&FT as part of the maiden edition of The Money Report, the SEC boss explained that the DDEP experience had re-emphasised that risk is inherent in investing and needs to be understood and managed effectively.

To restore investor confidence and enhance market stability, the SEC is embarking on a series of measures to bolster investor education, empowering individuals with the knowledge needed to make informed investment decisions.

“As we always say, a well-informed investor is a well-protected investor. To achieve this, we have developed an extensive investor education plan aimed at empowering individuals with the knowledge they need to make informed decisions,” he noted.

“Drawing an analogy to the response during the COVID-19 pandemic, education played a pivotal role in altering behaviours and reducing the incidence of certain diseases. Similarly, education within the financial market context empowers individuals to comprehend market dynamics, make informed investment decisions, and proactively manage risks,” he continued.

Furthermore, the SEC is actively refining market rules, collaborating with global standard-setting bodies like the International Organisation of Securities Commissions (IOSCO) to align with international best practices.

Mr. Tetteh noted: “Our participation in the IOSCO keeps us aligned with international best practices and equips us with insights on effectively responding to similar challenges faced by securities markets worldwide”.

In terms of communication and public engagement, the SEC has established a dedicated Communications and External Affairs Unit to bridge communication gaps and facilitate clear and accessible information dissemination – one that was born in response to the industry revamp from 2018 and has served well during the DDEP.

“‘Time with the SEC’ events have been initiated to educate the public, and local languages are used to inform and counter misinformation,” he added.

Addressing market volatility and expanding financial products is also paramount for the SEC. The commission acknowledges the challenges posed by macroeconomic conditions, and is considering the introduction of more diverse financial products, including forwards and derivatives markets.

Regulatory frameworks are being developed for asset-backed securities, securities lending and borrowing, market making and margin trading to ensure market integrity, the regulator noted.

In an ever-changing financial environment, the SEC ensures regulatory agility and crisis preparedness by engaging with entities facing issues and collaborating with other regulators under the Financial Stability Council (FSC). This approach aims to create a resilient and stable financial sector.

“The SEC’s multi-faceted strategies underscore its commitment to restoring investor confidence, enhancing market stability, and fostering a well-informed and resilient capital market in Ghana. The commission’s proactive and comprehensive approach aligns with the vision of an efficient, diversified, and well-regulated market poised to navigate challenges and opportunities in the dynamic financial landscape,” the regulator stated.

In a similar vein, the Chief Executive Officer (CEO) of the Ghana Association of Banks (GAB), John Awuah, said while certain factors like inflation is beyond their direct control, the banking industry is actively taking measures to endure challenges and support the economy, adding that in the face of adversity, the sector demonstrated unwavering determination to play its vital role in Ghana’s recovery journey.

He attributed the losses incurred by the banking sector largely to market-related factors, particularly the reduction in coupon rates resulting from the exchange programme. Despite these challenges, he expressed confidence that a consistent evaluation of underlying performance could lead to positive recovery prospects.

“It’s important to note that these losses, particularly those tied to market movements, can be reversed as market fundamentals improve,” the GAB head added.

While acknowledging that a short-term perspective might present a less hopeful outlook, Mr. Awuah emphasised the significance of considering the broader financial landscape and market fundamentals over the long-term.

“Ultimately, a focus on the broader financial landscape, market fundamentals, and the trajectory of the banking sector’s underlying performance provides a more comprehensive understanding of the sector’s potential for resilience and recovery,” he asserted.

He pointed out that while the underlying performance of banks remains strong, the sector’s fate is interconnected with the overall economy, underscoring the importance of economic recovery for the banking sector.

Highlighting the essential role of economic managers in stabilising market fundamentals, the CEO emphasised the need for a well-controlled economic environment to foster prosperity. He expressed confidence in the capabilities of individuals to navigate this path successfully.

Awuah outlined the hope that the response to the next phase of the debt swap initiative would yield favourable outcomes similar to the first DDEP closure, resulting in lowered Treasury bill rates. He anticipated that once these trends are visible and risk factors mitigated, banks would be able to continue extending financial support to businesses and individuals.

The CEO underscored the industry’s medium to long-term perspective, even amid current challenges. He remained optimistic that the usual fiscal lapses recorded during election years will be curbed next year.

“If we can navigate through this period and maintain our current position over the next 12 months, barring further shocks, we can consider ourselves on a positive trajectory. Considering our relatively small population of around 35 million and the resources available to us, I don’t believe the recovery programme is insurmountably vast. With the right expertise at the helm, I am confident we can manage it. As an industry, we possess the necessary resilience to survive and contribute to anchoring the recovery,” he stressed.

In light of this outlook, Mr. Awuah confirmed that collaborative efforts between GAB and the Ministry of Finance, such as the ‘YouStart’ initiative, aimed at supporting young entrepreneurs will continue, while highlighting the banking sector’s commitment to empowerment, including women and youth-owned businesses.