BoG sets Oct. 1 for Repo trading between banks

The Bank of Ghana (BoG) has set October 1, 2020 as the date when the trading of repurchasing agreements (Repos) between banks based on Global Master Repurchasing Agreement (GMRA) will go live in Ghana.

This comes after the launch of the Guidelines for Repos in Ghana, based on which trading will be carried out in accordance with the GMRA legal documents.

In a statement, the Central Bank is therefore urging all banks in the country to executive a GMRA with each other by September 15, 2020 in readiness for the opening of GMRA-based Repos trading on October 1.

It reminded the banks that “With effect from October 1, 2020, all Repo trading in Ghana shall be governed by the GMRA legal documentation,” adding, “All eligible Repo counterparties are to fully comply with the Guidelines for Repos in Ghana document, which is available on the BoG website.”

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The Central Bank said Repo counterparties may use the appropriate systems to facilitate their conduct of GMRA-based Repos.

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.

The buyer shall apply a haircut at the initiation of the Repo transaction,” it said, warning that full close-out netting shall apply in the event of default.

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.