The Bank of Ghana (BoG) through a new notice issued on Tuesday, March 13, 2021, has directed banks and Specialised Deposit-Taking Institutions (SDIs) in the country to not declare and pay dividends to shareholders for both last year and this year.
According to the Central Bank all banks and SDIs should desist entirely from declaring or paying dividends or distributing reserves to shareholders, and from making any irrevocable commitments regarding the declaration or payment of dividends to shareholders, until further notice.
The new directive which is a revision of an earlier directive issued in March 2020, the BoG explains, is in view of the uncertainties surrounding the pandemic and its potential impact on the banking sector.
However, if a bank would like to still declare and pay dividends to its shareholders, the Central Bank posits that it must first meet the following minimum requirement:
- Compliance with Sections 34 and 35 and all other relevant provisions of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930);
- Compliance with the Capital Adequacy Ratio of 13%, Cash Reserve Ratio of 10% and Non-Performing Loans (NPL) ratio of below industry average at all times;
- Compliance with Section 72 as well as all other relevant provisions on dividend payments as prescribed under the Companies Act, 2019 (Act 992);
- Submission of Audited Financial Statements to the Bank of Ghana;
- Have no restrictions imposed on its operations by the Bank of Ghana by way of Prompt Corrective Actions (PCAs) as per Act 930; and
- The Bank of Ghana stress test results on the specific bank showing that it will maintain sufficient capital buffers after payment of dividends.
Adding, “Banks and SDIs shall seek prior written approval from the Bank of Ghana before declaring or paying dividends or distributing reserves to shareholders, and making any irrevocable commitments regarding the declaration or payment of dividends to shareholders.”
The BoG further noted that it shall continue to monitor developments in the industry to identify emerging risk and potential threats to the safety and soundness of the banking sector and shall issue further notices as may be required.
