BoG direct banks, SDIs not to pay dividends

The Central Bank has directed banks and Special Deposit-taking Institutions (SDIs) to desist from declaring or paying dividends or distributing reserves to shareholders.

It has also urged the financial institutions not to make any irrevocable commitments regarding the declaration or payment of dividends to shareholders for 2020 and 2021 financial years, unless certain minimum criteria have been satisfied.

The Central Bank, which made this known in a recent notice, said this was in view of the uncertainties surrounding the pandemic and its potential impact on the banking sector.

Such criteria, the BoG said, included compliance with Sections 34 and 35 and all other relevant provisions of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930; compliance with the Capital Adequacy Ratio of 13%, Cash Reserve Ratio of 10% and Non-Performing Loans (NPL) ratio of below industry average at all times; compliance with Section 72 as well as all other relevant provisions on dividend payments as prescribed under the Companies Act, 2019 (Act 992); and the submission of Audited Financial Statements to the Bank of Ghana.

The others are that the institutions should have no restrictions imposed on its operations by the Bank of Ghana by way of Prompt Corrective Actions (PCAs) as per Act 930; and also that the Bank of Ghana stress test results on the specific bank should show that it will maintain sufficient capital buffers after payment of dividends.

“Banks and SDIs shall seek prior written approval from the Bank of Ghana before declaring or paying dividends or distributing reserves to shareholders, and making any irrevocable commitments regarding the declaration or payment of dividends to shareholders.

“The measures taken by the Bank of Ghana during the pandemic have ensured that the banking sector has generally remained robust and resilient. However, the Bank of Ghana shall continue to monitor developments in the industry to identify emerging risk and potential threats to the safety and soundness of the banking sector and shall issue further notices as may be required.

“All banks and SDIs are to take note of the above directive for immediate compliance,” it mentioned.

---Daily Guide