Dr. Richmond Atuahene, a banking consultant, has recommended that the Bank of Ghana (BoG) issue Financial Sector Stability Fund (FSSF) bonds as an added layer in addressing the solvency challenges faced by institutions in the financial sector.

The proposal – contained in a study co-authored with K.B. Frimpong, a financial analyst – comes as government seeks to reduce its fiscal burden while facilitating the restructuring and recapitalisation of local banks which have incurred losses through the Domestic Debt Exchange Program (DDEP).


According to Dr. Atuahene, the DDEP losses should be transferred from banks’ capital at book price – the value at which they are currently recognised in the banks’ financial records-– to the Financial Sector Stability Fund Secretariat Office at the apex bank.

To replace the resulting capital shortfalls, the central bank should issue interest-bearing FSSF bonds which are projected to yield an annual interest rate between seven and nine percent – and should have an initial statutory life of four years.

Elaborating on the mechanism, Dr. Atuahene stated: “By transferring DDEP losses from banks’ capital to the Financial Sector Stability Fund Secretariat Office, the burden on banks is alleviated. The issuance of interest-bearing FSSF bonds by the Bank of Ghana replaces the capital shortfall, ensuring a viable pathway for banks to recover and thrive.

“The issuance of FSSF bonds would provide the necessary capital support for restructuring and recapitalising eight local banks. Additionally, it would help alleviate government’s fiscal burden while shareholders of banks undertake to repay the Ghana Financial Sector Stability Fund within a four-year period,” the former banker added.

He further argued that this approach would incentivise banks to expedite the restructuring process. Dr. Atuahene emphasised the importance of this repayment commitment, stating that the repayment obligation creates a strong incentive for banks to expedite the restructuring process as it underscores the shared responsibility between banks and government in restoring stability to the financial sector.

“In order to create the right incentives, banks will be prohibited from distributing dividends; subjected to restrictions in risk exposures; and be subjected to enhanced monitoring if they fail to meet minimum capital adequacy ratios. Early recapitalisation will also receive support from the Financial Sector Stability Fund,” Dr. Atuahene added.

The recommendation draws on successful international examples, such as Greece’s state-sponsored recapitalisation of banks during their debt restructuring in 2013. In addition, Ghana implemented a similar model in 1985 during a severe banking crisis.

With support from the World Bank, the country implemented a Financial Sector Adjustment Programme (FINSAP), including establishing the Non-Performing Assets Recovery Trust (NPART) to facilitate the restructuring and recapitalisation of major state-owned banks.

“Ghana has previously experienced success with programmes such as the FINSAP implemented between 1988 and 1997. The current FSSFP should build on these experiences, incorporating lessons learned and international best practices,” he said.

Already, calls are increasing for the Ministry of Finance and BoG to expedite operationalisation of the GH¢15billion FSF fund. This fund is expected to provide capital support not only for the eight local banks that participated in the debt exchange programme, but also for state-owned banks.

The domestic financial sector has been under significant distress in terms of solvency and liquidity due to various factors – including high inflation rates, currency depreciation and inadequate financial policies.