The Ghana Association of Banks says its members will not participate in any form of Domestic Debt Exchange Program (DDEP) as they demand official communication from government ending the exercise.
Chief Executive Officer of the Association, John Awuah says any more burden on the banks will collapse most of their operations.
Government reached an agreement with banks to restructure ¢15 billion of locally issued U.S. dollar bonds and cocoa bills which was a key condition for the IMF deal.
According to John Awuah any repeat of the programme will not be welcome as the banks do not have any appetite for another taste of it.
“I’m not sure as a country there’s any kind of appetite for any round of domestic debt. The local bondholders have taken a lot of hits, even the central bank…in terms of what they did to make sure the process moved forward and the resulting media and public outcry…so the appetite at this stage, I am not sure there is any kind of space to accommodate another round,” he said on JoyNews’ PM Express.
He added that the Association is looking forward to formally hearing from government concerning the end of the DDEP as a way of ensuring investor confidence in the local market.
“We have not had any formal communication but of course, those were the outstanding issues on the table.
“The market moved on and we need some certainty within the financial markets it is important that very concrete messaging is sent out and market participants are aware that this is where we are and from now we can only look at the upside of our engagement in the marketplace.
“So as banks, we are not looking forward to whatever name you have for it, but we’re not looking forward to any exchange or debt operations or other technical language you have for it.
“The point is the industry has taken too much hit and when the industry takes a hit, the long-term effect is that it is the economy that takes a hit because you need a strong financial system to anchor any kind of recovery,” he said.
The CEO of GAB, John Awuah, said commercial banks have been compelled by the current economic environment to tighten their precautionary measures in lending to customers.
“The way the banks have managed to weather the storm during these difficult periods where we’ve had to take on some significant losses, it should tell you that the banks had built up the required capital buffers.
“Of course, there are one or two or three banks that would need some capital top-ups in order to operate within the regulatory confines. But we have some time through the regulatory reliefs that the Bank of Ghana gave to the industry to work our way back into the right capital levels.
“But as I say, if you’re a bank if the regulator says three years, it’s in your own interest that you kind of upfront manage your capital requirements to make sure that if it is three years you’re working within a shorter period to bring in capital.
“We have to also take cognizance of the fact that Ghana is not particularly an attractive destination for capital at the moment given all the market fundamentals that we have moving against us. But we are coming out. I read the IMF that said we’re gradually working our way out,” he said.
Meanwhile, Minister of State at the Finance Ministry, Dr. Mohammed Amin Adam has disclosed that government is looking at reopening the Domestic Debt Exchange Programme for persons who did not sign up to reconsider their decisions.
According to him, the move has been influenced by concerns of tradability by some investors who still want to hold on to the old bonds and government papers.
Dr. Adam added that the proposal could be considered soon with some measures taken to deal with the concerns of all investors.
Appealing to bondholders who did not sign up the first time, he urged such investors to take the opportunity when the window is opened to the public.
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