The Governor of the Bank of Ghana, Dr Ernest Addison, has said the suspension of dividend payments to shareholders by banks was to prevent banks from being undercapitalised and illiquid in the wake of the coronavirus pandemic which has resulted in a gloomy economic outlook.

"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 pointed out.

Responding to a question at a recent Monetary Policy Committee press briefing, Dr Addison said: "We are trying to be risk-averse and, in a sense, protect depositors so that the banks would be careful of how they dissipate earnings”.

"All we are saying is that; we can see the evolution of weaker economic conditions, which means in the outlook, one can expect that credit impairments would go up, banks would face a more challenging environment and these will translate into non-performing loans."

He explained that it was important to preserve capital and conserve liquidity at this time of an unusual economic situation, adding: "If you carefully think about the situation, it is in the interest of the shareholders themselves that their institutions would be stronger, even after the end of this pandemic."

In March 2020, the Bank of Ghana directed banks and SDIs to desist from declaring or paying dividends and from making other distributions to shareholders for the financial years 2019 and 2020.

They can only pay a dividend when the Bank of Ghana was satisfied that such institutions met the regular prudential requirements and not relying on the additional liquidity released by the regulatory reliefs provided by the Bank of Ghana.

The Central Bank indicated that it would continue to monitor the evolving impact of the pandemic on banks and SDIs and on their customers, and would issue further directives as required.