The Bank of Ghana is currently
embarking on a
number of institutional
reforms to support the
growth and the development of the
capital market in that country, including
capital market reforms and the introduction
of a new Central Securities
Depository System (CSDS).
According to the Deputy Governor of
the Bank, Lionel Lare Dosoo, the change
in the macro-economic environment
in Ghana has necessitated these farreaching
institutional reforms to ensure
the security of financial transactions
of investors and to encourage a strong
and competitive financial system.
The deputy governor adds that the
changes will broaden the market for the
government securities as well as making
it easier for investors to buy and sell
One of the major reforms being
introduced by the central bank is the
new Central Securities Depository
System (CSDS), an electronically-based
record system which aims to eliminate
the use of physical certificates. In
words, it is a computerised data
recording system that records individual
security holdings at a central area. With the implementation of the CSDS, there
will be a gradual phasing out of physical
certificates for securities.
“It is one important step in developing
a secondary market for securities,” says
the deputy governor.
Dosoo is also optimistic about the
contributions that these reforms will
bring to the Ghana’s capital market.
He believes that these changes will
broaden the market for government
of Ghana securities at the best price,
allow investors to buy and sell securities
at best price and make the records of
ownership of securities more secure.
The transition from physical
certificates to records held in an
electronic format comes with several
According to officials of
the central bank, money transactions
like the sale of newly-issued securities
can now be completed within a day.
In addition, market trading
investors on already issued securities
will also be completed the same day.
Clearly, the new system will be faster
and more accurate, and it will be easier
to open an account at the CSDS through
a primary dealer or licensed broker.
Above all, though, the system ensures
greater security and confidentiality.
Records of ownership of individual
securities will be maintained centrally
as well as at the respective primary
dealers to reduce the possibility of harm
to investors as a result of poor recordkeeping
and dealer malfeasance.
Under the system, investors are
also permitted to transfer securities to
dealers who are willing to purchase them
at a higher price in an attempt to create
a secondary market for securities.
Though the Central Securities
depository system is the brainchild of
the Bank of Ghana, the Securities and
Exchange Commission, the regulator
of the capital market in Ghana, will be
in charge of regulating it.
however, the Central Bank intends to
ultimately hand over ownership of the
CSDS to investors under a separate
To give the system legal backing, a
bill has been placed before parliament
which is likely to be passed into law this
year. At the moment, however, existing
laws allow the CSDS to handle the
holdings and transactions of government
securities before the actual law giving it
legal backing is passed.
However, the CSDS will not be
able to handle equity transactions
until the bill covering it is passed into
law. In addition, portions of Ghana’s
Companies Code would have to be
amended to enable the new system to
handle equity transactions.
But when all these legal requirements
are fulfilled, trading in equities listed
on Ghana Stock Exchange will receive
a boost, since equity investors wishing
to actively trade their portfolios could
do so with relative ease. Indeed, within
three days an investor can
clearing and settlement on their trades,
meeting the international standards for
In consultation with the Ministry of
Finance and Economic Planning, the
Bank of Ghana has also introduced a
range of short-term securities ranging
from 28 days to 56 days and threeyear
treasury notes and bonds with a
view to deepening options available to
government treasuries and investors.
The new bills will be sold at weekly
auctions, and are tailor-made for
Ghanaian investors who normally invest
in the 182-day treasury bills. These
new instruments will thus satisfy the
demands of two types of investors:
those who usually invest in treasury bills
and those who invest long term.
Another advantage of the new
securities is the two-year floating rate
security, whose interest rate will change
every 91 days as the weighted average
interest rate on the 91-day treasury bills
Next is a three-year floating rate
security tied to
the 182-day treasury bill
interest rate, and also two- and three year
securities that would carry a fixed
rate on interest throughout their lives.
With all these reforms, the Government
of Ghana Index-linked Bond (GGLIBs)
will be phased out.
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