Over the past six years, banks have increased their appetite for funds from overnight lending and placements which they source under repurchase agreements (REPOS) as an alternative but less costly way to manage their cash reserve ratios (CRRs).<\/p>\n
Between 2010 and September this year, the face value of transactions executed under REPOS rose by 366.1 per cent to GH\u00a2123.14 billion.<\/p>\n
Data from the Central Securities Depository (Gh) Limited (CSD) showed that after ending 2010 at GH\u00a226.42 billion, overnight lending within the interbank market and the Bank of Ghana (BoG) rose to GH\u00a282.16 billion in 2013.<\/p>\n
It rose further to GH\u00a2195.79 billion in 2014 before easing to GH\u00a2183.30 billion in December last year.<\/p>\n
According to data available to the GRAPHIC BUSINESS, the funds were borrowed at interest rates that averaged 21.4 per cent and 25.54 per cent.<\/p>\n
Just like the face value of the transactions, collateral for the REPOS, which is mostly in short-term securities lodged with the CSD, also witnessed a tremendous growth within the six-year period.
\nFrom GH\u00a228.30 billion in 2010, collateral for REPOS rose to GH\u00a284.22 billion in 2013 before ending on a high of GH\u00a2125.3 billion in the third quarter of this year.<\/p>\n
Implications<\/strong> \u201cLending and borrowing are means of managing their liquidity. For instance, at the end of the day, if a bank realises that it has funds, it can lend to another bank that is short overnight or for two days and then support it with REPOS.\u201d<\/p>\n \u201cSo once it\u2019s going up, I will think that there is recognition of a better way of managing their liquidity,\u201d he told the paper in an interview.<\/p>\n On the rates quoted on the transactions, Mr Tetteh said it was a reflection of the short-term nature of the funds.<\/p>\n Managing liquidity He said REPOS was the simplest and innovative way to deplore and manage excess liquidity, explaining that such transactions were not used to grow the assets of the banking sector.<\/p>\n \u201cIt is simply an avenue to deplore very short liquidity. It is not as if banks are relying on REPOS to fund asset growth or lending.<\/p>\n \u201cIt is simply the place you put any surplus that you have for just one day or where you can borrow money for just one day to meet any deficit that you may have,\u201d he said. \u201cIf it is that over a certain period of time banks are borrowing mainly from the central bank and not from colleague banks, then it means there is something wrong with the market; it means that the market is short,\u201d he said, explaining that such a development would be an indication that there was a liquidity squeeze in the market.<\/p>\n \u201cIf it is within themselves, then it is a fair, balanced and good market. It means that one bank has enough but another does not, and so the excess has to be passed around,\u201d he explained.<\/p>\n He added that the spike in the REPOS showed that the entire banking industry was properly funded such that excess funds existed for those in need.<\/p>\n – Over the past six years, banks have increased their appetite for funds from overnight lending and placements which they source under repurchase agreements (REPOS) as an alternative but less costly way to manage their cash reserve ratios (CRRs). Between 2010 and September this year, the face value of transactions executed under REPOS rose by 366.1 […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[121,32],"tags":[5561,13713,2002,3,13714],"yoast_head":"\n
\nThe Chief Executive Officer of the CSD, Mr Stephen K. Tetteh, praised the development as a positive trend that showed that banks were finding innovative ways to manage their cash reserve requirements.<\/p>\n
\nThe Director of Markets and Corporate, Barclays Bank Ghana, Mr Kobla Nyaletey, agreed but added that the growth also reflected the strong growth in the banking sector and the economy.<\/p>\n
\nHe, however, explained that a spike in overnight lending from the BoG would mean that the market was short to contain the pressures from the banking sector.<\/p>\n
\nSource: Graphic Online<\/p>\n","protected":false},"excerpt":{"rendered":"