Towards accomplishing its monetary security unbiased, the Bank of Ghana (BoG) has built up an approach and operational system for giving Intraday Liquidity Facility (ILF) and Emergency Liquidity Assistance (ELA) inside the financial area.
The central bank said the structure has been intended to address shortcomings that were distinguished during the new financial area emergency, and it means to advance straightforwardness and better liquidity planning by monetary establishments while ensuring the asset report of the BoG.
During the financial emergency, the BoG disavowed the licenses of nine widespread banks, 347 microfinance organizations, 39 microcredit organizations, 15 savings and loans companies, 8 finance house organizations, and two non-bank foundations.
According to the policy framework document, the ILF is to support efficient functioning of the payment and settlement systems, whereas the ELA will provide liquidity support to eligible and solvent banks, savings and loans companies, and finance houses (BSFs) facing temporary liquidity challenges.
The bank said the two liquidity instruments are expected to supplement the Global Master Repurchase Agreement (GMRA)-backed reverse repurchase facility that it currently provides to banks as part of its monetary policy framework.
The BoG has already set up the Ghana Interbank Settlement (GIS) system to settle high-value interbank payment obligations in real time.
Under this framework, participating banks are needed to keep up adequate positive adjusts in their settlement records to meet their commitments inside the GIS framework on an ongoing premise.
This has generally help forestall repayment disappointments which could antagonistically affect monetary security and money related arrangement transmission.
Acknowledging that prolonged liquidity shortages could fuel solvency challenges, with ramifications for financial stability, public confidence and the economy, the BoG said it will continue to discretionarily exercise its lender of last resort function, subject to defined preconditions of the ILF and ELA.
The ELA accessed by a regulated institution will exclusively be utilized for respecting client withdrawals and meeting developing non-capital-related debt obligation, as will be shown in the solicitation to the BoG. Any remaining uses, including installments to members, insiders and related gatherings, are disallowed.