Trading of Repurchase Agreements (Repos) based on the Global Master Repurchasing Agreement (GMRA) between banks in Ghana, is set to commence on October 1, 2020.
This comes after its launch in November 2019 and scheduled implementation on April 2, 2020 but postponed due to the Covid-19 pandemic. Repos trading based on GMRA among banks is expected to support cash-market efficiency and liquidity in the primary and secondary local currency bond markets which remains a key source of financing for government.
The Central Bank in a statement, urged all banks in the country to execute a GMRA with each other by September 15, 2020 in readiness for the opening of GMRA-based Repos trading on October 1.
“With effect from October 1, 2020, all Repo trading in Ghana shall be governed by the GMRA legal documentation. All eligible Repo counterparties are to fully comply with the Guidelines for Repos in Ghana document,” an excerpt of the statement read.
It also said the buyer of a Repo Security shall mark-to-market using Bloomberg as a pricing source, adding that, where Bloomberg does not price a Repo Security, the buyer and seller shall agree a price for the purpose.
GMRA is a model legal agreement designed for parties transacting Repos and is published by the International Capital Market Association (ICMA), which is the body representing the cross-border bond and repo markets in Europe.
The GMRA is the principal master agreement for cross-border repos globally, as well as for many domestic repo markets like the one to be done in Ghana on October 1.
Repo, on the other hand, is a form of short-term borrowing for dealers in government securities. A dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.
For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.
