BoG Launches Repo Market Guidelines

The Bank of Ghana (BoG),
together with the Ghana Fixed Income Market (GFIM) Committee, has launched the
‘Guidelines for Repurchase Agreements’ in Ghana.
This achievement is one of many initiatives to accelerate the country’s money
market development and was presented by a high-ranking Ghanaian delegation to
the World Bank/IMF Annual Meetings 2019 in Washington DC.

A well-functioning money market
underpins liquidity in the secondary market for government securities, lowering
the risk-free yield curve. Repurchase transactions, also known as repos, are a
key money market instrument. With the risk-free curve as a reliable and
transparent pricing reference for all other issuers of debt, funding costs
decline for market stakeholders, including the government.

All the above foster and help
stabilize economic growth. “Repo markets facilitate the flow of cash and
securities in financial markets. A well-functioning repo market contributes to
the efficient allocation of capital in the real economy by supporting liquidity
in other markets. Repo markets serve several benefits: they provide a low-risk
option for cash investment, transform collateral, support cash-market
efficiency and liquidity, facilitate the hedging of risk and enable investors
to monetize liquid assets,” according to Dr. Ernest Addison, Governor,  BoG.

The accessibility and
efficiency of African money markets can be greatly improved through the
strengthening of the legal and regulatory environment that underpins repo
transactions, specifically, the enforceability of standard financial markets
master agreements.

At the start of 2018 and
following a Regulators’ Roundtable by Frontclear and the International Capital
Markets Association (ICMA) on repo and Global Master Repurchase Agreement
(GMRA) enforceability in Accra, the BoG and the wider GFIM committee embarked
on an effort to address GMRA enforceability.

“The adoption of these
guidelines, I believe, will not only ensure legal certainty and enforceability
but will also improve market transparency, liquidity and participation. Looking
ahead, we hope to develop our repo market to grow beyond the borders of Ghana
to improve intra-African trade. It is my firm belief we would one day be here
again for another launch but this time for the whole of the African continent,”
according to Dr. Maxwell Opoku Afari, Chairman of the GFIM.

The Ghana Fixed Income Market
(GFIM) is the secondary market for all fixed income securities. Fixed income
securities of the Government of Ghana (including treasury bills, notes and
bonds) and the BoG bills are automatically admitted and traded on the GFIM upon

GFIM, in collaboration with
Bloomberg, has launched the Bloomberg E-Bond trading and market surveillance
system, a new electronic trading system for Ghanaian government bonds. The
result – Ghana Repo Market Guidelines – has been launched today by Ghanaian
dignitaries attending the WB/IMF Annual Meetings, including Dr. Ernest Addison,
Charles Adu-Boahen, Deputy Minister of Finance and Dr. Maxwell Opoku-Afari,
Chairman of the GFIM.

“We are encouraged by the
publication of these guidelines referencing the Global Master Repurchase
Agreement, the principal master agreement for cross-border repos globally, as
well as for many domestic repo markets around the world. We see this as a
positive step in the development of the repo market in Ghana,” according to Martin
Scheck, Chief Executive of ICMA.