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03.11.2004 Business & Finance

Bank of Ghana implements new securities system

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Accra, Nov. 3, GNA - Bank of Ghana (BoG) will by the end of this month begin the implementation of the electronic Centralized Securities Depository (CSD) system that would propel Ghana's financial and capital market into the international arena.

The system, which is a computer-based data recording system for the holdings of all government securities, equities and corporate bonds would improve security and investor confidence as well as ease clearing and settlement procedures.

Addressing journalists at a day's workshop on Wednesday, Mr Van Lare Dosoo, Deputy Governor of the Bank, said as part of the process, a new code of conduct for primary dealers in government securities as well as revised wholesale auction procedures were launched.

"A policy of universal banking has been implemented, with larger capital requirement to enable banks to be more competitive and offer a wider variety of services," he added.

Mr Dosoo also said the Bank was at the final stages of introducing an inter-bank foreign exchange market.

He noted that, while putting in place the necessary framework and infrastructure to facilitate capital market development, it was equally important to have an environment of macroeconomic stability to enable the financial sector to thrive.

According to him, the current "path of dis-inflation and macroeconomic stability with reduced fiscal deficits...would make it easier for investors to buy and sell securities at best price, and allow them to value the securities of others other than the government". On the new government securities introduced last September, Mr. Dosoo said they were designed to satisfy demands of two types of investors:

Those who usually prefer to invest in treasury bills and those for long-term investment.

He said it was expected that investors would earn a somewhat higher rate of return on the two and three years floating rate securities than they would earn on a 91-Day Treasury Bills.

The other, a two and three-year securities would carry a fixed rate of interest throughout their lives.

As a result Mr. Dosoo said, the government Index-linked Bonds called GGILBs would be phased out as they matured.

These new securities would enable government to lengthen the average maturity of its debt and reduce the frequency with which it has to refinance maturing securities, he said.

In addition, the Deputy Governor announced the introduction of the Bank's own bills with maturities, 28 and 56 days to be sold at weekly auctions.

Mr Dosoo said that the new bills would be easier for investors to distinguish the borrowing done at each weekly auction to finance the government from the borrowing that was done in connection with the bank's open market operations. 03 Nov. 04

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