Between 2010 and September this year, the face value of transactions executed under REPOS rose by 366.1 per cent to GH¢123.14 billion.

Data from the Central Securities Depository (Gh) Limited (CSD) showed that after ending 2010 at GH¢26.42 billion, overnight lending within the interbank market and the Bank of Ghana (BoG) rose to GH¢82.16 billion in 2013.

It rose further to GH¢195.79 billion in 2014 before easing to GH¢183.30 billion in December last year.

According to data available to the GRAPHIC BUSINESS, the funds were borrowed at interest rates that averaged 21.4 per cent and 25.54 per cent.

Just like the face value of the transactions, collateral for the REPOS, which is mostly in short-term securities lodged with the CSD, also witnessed a tremendous growth within the six-year period.
From GH¢28.30 billion in 2010, collateral for REPOS rose to GH¢84.22 billion in 2013 before ending on a high of GH¢125.3 billion in the third quarter of this year.

Implications
The Chief Executive Officer of the CSD, Mr Stephen K. Tetteh, praised the development as a positive trend that showed that banks were finding innovative ways to manage their cash reserve requirements.

“Lending and borrowing are means of managing their liquidity. For instance, at the end of the day, if a bank realises that it has funds, it can lend to another bank that is short overnight or for two days and then support it with REPOS.”

“So once it’s going up, I will think that there is recognition of a better way of managing their liquidity,” he told the paper in an interview.

On the rates quoted on the transactions, Mr Tetteh said it was a reflection of the short-term nature of the funds.

Managing liquidity
The Director of Markets and Corporate, Barclays Bank Ghana, Mr Kobla Nyaletey, agreed but added that the growth also reflected the strong growth in the banking sector and the economy.

He said REPOS was the simplest and innovative way to deplore and manage excess liquidity, explaining that such transactions were not used to grow the assets of the banking sector.

“It is simply an avenue to deplore very short liquidity. It is not as if banks are relying on REPOS to fund asset growth or lending.

“It is simply the place you put any surplus that you have for just one day or where you can borrow money for just one day to meet any deficit that you may have,” he said.
He, however, explained that a spike in overnight lending from the BoG would mean that the market was short to contain the pressures from the banking sector.

“If it is that over a certain period of time banks are borrowing mainly from the central bank and not from colleague banks, then it means there is something wrong with the market; it means that the market is short,” he said, explaining that such a development would be an indication that there was a liquidity squeeze in the market.

“If it is within themselves, then it is a fair, balanced and good market. It means that one bank has enough but another does not, and so the excess has to be passed around,” he explained.

He added that the spike in the REPOS showed that the entire banking industry was properly funded such that excess funds existed for those in need.