The Bank of Ghana says it is hopeful that the proactive measures it has taken so far to protect the financial sector from a possible shock from COVID-19 will yield results.
In its latest banking sector report, the central bank says it has taken 5 major decisions that will stabilize the financial sector against any burden from the coronavirus pandemic as well as protect depositors’ fund.
In the report, the Bank of Ghana pointed out that the decision to lower the Monetary Policy Rate by 150 basis points to 14.5 percent is expected to lower interest rates and help reduce the challenges in securing credit at reasonable rates for individuals and businesses.
In addition, the central bank is hopeful the Reduction in Primary Reserve Requirements from 10 percent to 8 percent will broaden and expand the coverage of channeling additional funds to support lending to all critical sectors of the economy including the informal sector.
Thirdly, the Bank of Ghana is hopeful the reduction in prudential limit of Capital Adequacy Ratio from 13.0 percent to 11.5 percent will complement the reduction in primary reserves by helping to boost credit expansion to support the economy.
The report further maintained that the reduction in provisions for loans in the “Other Loans Especially Mentioned” category from 10 percent to 5 percent could minimize the impact of the potential challenges of Non-Performing Loans on loan loss provisions and profit margins of banks, while the classification of loan repayments past due for Microfinance Institutions increased to 30 days as current, will help minimize the impact of loan repayment challenges on Microfinance Institutions.
The Central Bank says it will ensure that the additional liquidity released from these policies do not move to investment in government securities and paying of dividends to shareholders.
