- The Bank of Ghana has given the reasons behind its order to banks to halt payment of dividends
- It explained that the decision was in line with attempts to prevent undercapitalization and illiquidity
- The Central Bank added that the decision was necessary due to the outbreak of the coronavirus
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The Bank of Ghana has revealed the reason behind its decision to restrain banks from paying dividends to shareholders.
According to the Governor, Dr.Paul Addison, the move was to prevent banks from undercapitalization and illiquidity.
He added that the timing was appropriate, in the wake of the outbreak of the coronavirus.
READ ALSO: COVID-19: MTN suspends payment of dividends and postpones AGM
"All the measures we have put in place are in the interest of depositors and in the longer-term, the interest of the investors themselves. This is because you have witnessed what happens when banks are undercapitalised and have liquidity issues.
"It is the depositors who fail to get access to their deposits in the banks", Dr Addison argued.
Per a report by classfmonline.com, he added that measures are being implemented to protect depositors.
Dr. Addison explained that it was vital to preserve capital and conserve liquidity at this time of an unusual economic situation and as such banks ought to tread cautiously in the use of earnings.
YEN.com.gh earlier reported that Bank of Ghana (BoG) suspended the payment of dividends by banks and Special Deposit Institutions for the 2019/2020 financial year.
The instruction comes at a time when Ghana is combating the coronavirus which has adversely affected the financial sector.
Shareholders of the stated institutions are therefore not expected to receive dividends for the period in question.
READ ALSO: BoG advises banks to halt purchase of T-bills with liquid funds
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