BOG justifies non-payment of dividends

THE Bank of Ghana (BoG) has justified its decision not to allow the payment of dividends by banks and Specialized Deposit-Taking Institutions (SDIs), explaining the directive was meant to absorb any potential operational losses and support customers throughout the COVID-19 pandemic.

Dr Ernest Addison, Governor of the Bank at a press briefing last Friday stressed that the motive behind the directive was to “protect depositors as well as investors.”
“We are trying to be risk-averse and in a sense to protect depositors so that banks will be careful about how they dissipate earnings,” Dr Addison stated.
It will be recalled that in March this year the BoG directed banks and SDIs to desist from declaring or paying dividends and from making other distributions to shareholders for the financial years 2019/2020.
It was important to conserve the liquidity and capital that the banks had to strengthen their capacity during and even after the end of the pandemic.
“When banks are undercapitalized and have liquidity issues, depositors fail to get access to their funds in the banks,” the Governor indicated.
Dr Addison added that the government had put in place measures that will be in the interest of depositors as well as that of the investors in the longer term.
The Governor noted there was an evolution of weaker economic conditions that may shoot up credit impairments and lead to a more challenging environment.
This he said would gradually translate into non-performing loans.
The BoG had in its directive urged banks and SDIs to desist from making any irrevocable commitments regarding the declaration or payment of dividends to shareholders, until further notice.
In the release issued by the BOG, it was noted that the shareholders in this context are holders of Common Equity Shares (CET1) and Additional Tier I (AT1) capital instruments of banks and SDIs.

Source: The Finderonline