Ghana Asks Banks to Seek Approval Before Paying 2019 Dividends
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Bank of Ghana has told the country’s lenders that they must seek approval before declaring and paying dividends on 2019 earnings as the regulator moves to guard against banks taking advantage of eased reserve rules due to the coronavirus to boost payouts to investors.
After cutting its benchmark interest rate by 150 basis points on March 18 to combat the economic impact of the virus, the central bank announced a reduction in banks’ reserve requirements. The limit was lowered to 8% from 10% and the bank also halved the conservation buffer to 1.5% from 3%, which effectively cut the capital-adequacy ratio to 11.5% from 13%.
“Banks and specialized deposit taking institutions are to refrain from declaring and paying dividends or making other distributions to shareholders for the 2019 financial year unless the Bank of Ghana is satisfied that the institution is not relying on the additional liquidity released by the policy measures” of March 18, Bank of Ghana said in a statement on its website.
Banks must also not use liquidity gained from the eased capital rules to buy government securities, it said. Failure to comply could lead to sanctions, according to the statement.
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