The Chief Executive Officer of Sambed Consult, Mr Sam Bediako-Asante, says the directive by the Bank of Ghana (BoG) to banks and specialized deposit-taking institutions (SDIs) to suspend dividend payments to shareholders will have a negative impact on investments in the country.
He explains that the directive to banks and the SDIs not make dividend payments will discourage the investing public from subscribing to any investment product or offer in future.
BoG directive on dividend payments
The Bank of Ghana on March 21, this year, directed banks and SDIs to desist from declaring or paying dividends and from making other distributions to shareholders for the financial years 2019 and 2020.
In a statement, the central bank says that “the Bank of Ghana now directs that all banks and SDIs desist from declaring or paying any dividends or distributing reserves to shareholders, and from making any irrevocable commitments regarding the declaration or payment of dividends to shareholders, until further notice”.
It added that “for the avoidance of doubt, shareholders in this context means holders of Common Equity Shares (CET1) and Additional Tier I (AT1) capital instruments of banks and SDIs.”
However, the Bank of Ghana says that it will only grant exceptions to banks and SDIs only when it is satisfied that such institutions have met the regular prudential requirements and are not relying on the additional liquidity released by the regulatory reliefs provided by the central bank.
The Bank of Ghana has also indicated that it will continue to monitor the developing impact of the coronavirus pandemic on banks and SDIs and on their customers and that further directives would be issued as and when necessary.
The statement further explained that the directive is meant “to absorb any potential operational losses for banks and SDIs from the COVID-19 pandemic”.
Effect on the GSE
Mr Bediako-Asante has, however, advised the BoG to withdraw the directive, arguing that the consequences of the instructions will have a serious effect on the Ghana Stock Exchange (GSE) and investors.
“The Ghana Stock Exchange (GSE) will also see its trading activities going down since the most vibrant and active listed companies on the exchange are the banks. This situation can even lead to the pulling out of most players on the exchange,” he stated.
He further argued that majority of the people who invest with the financial institutions are pensioners who have invested their hard-earned monies in the companies through the Ghana Stock Exchange. He said Mutual Funds, Unit Trusts, SSNIT, and other asset management companies, including Pension Funds, will also lose their investment incomes
This, he added will affect their returns of the aforementioned finance houses and make them unpopular.
“The directive will make investments in the country a no-go area” taking into account how so many citizens have lost their investments to the collapsed financial institutions post the financial sector clean-up”, he further added.