BoG Guidelines For Repurchasing Agreements Effective April 2, 2020

The Bank of Ghana (BoG) has launched new guidelines for repo trading on the Ghanaian market. The move is to have a well-functioning repo market and contribute to the efficient allocation of capital in the real economy by supporting liquidity in other markets.

It is a new guideline that would help better regulate the purchase of government securities like treasury bills, bonds, notes and Eurobonds. Speaking at the launch in Accra, Governor of the Bank of Ghana Dr Addison said,

“This is once again another milestone as we continuously work to deepen Ghana’s capital market. I will briefly share a few remarks on this initiative and the expected impact on the financial markets.”

Dr Addison said the guidelines is based on the standard 2011 Global Master Repurchase Agreement. All the directives in the guidelines are binding on eligible counterparties and will serve as the regulatory guidance for repo trading going forward.

He added, “The key features of the GMRA-based repo guidelines include the absolute transfer of title to the buyer, an expanded list of eligible instruments which would promote a more liquid repo market, an expanded eligible participation to cover not only banks but SDIs, securities dealers, corporates and

high net worth individuals, and the requirement for margin maintenance requirements including features such as re-pricing, substitution of securities, and daily margining of collateral and a margin notice deadline which serves to reduce the credit and liquidity risks associated with the use of repos.”

Dr Addison said to provide further guidance, a Ghana country annex has been designed which specifies the supplementary terms or conditions to the GMRA to cover sell/back and forward transactions

There is also a Ghana Agency annex to cover transactions where at least one party is acting on an agency basis. Going forward, an elaborate training program to ensure that key market players and stakeholders are adequately trained on aspects of GMRA-based repos will be implemented.

The Governor earlier revealed that “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 $350 million.”

The Repurchase Agreement is expected to give some legal framework and “comfort” to investors that actively participate or buy short term government papers, notes and bills. Ghana is the third country in Africa to put in place these structures and regulations to oversee the repurchase of Agreement and trading.