kwesi bekoe amissah - arthur : new primary dealer system for ghana opening address by mr kwesi bekoe amissah - arthur, governor of the bank of ghana, at the stakeholders workshop for new primary dealer system, organised by the bank of ghana and the ministry of finance and economic planning ( mofep ), accra, 9 december 2010. * * * i am very happy to join you at this workshop which is the result of the collaborative effort of bog and mofep to enhance further the financial market in ghana. efficient and effective financial intermediation is crucial in any country ’ s development and it is imperative that the necessary infrastructure is put in place. beginning with this workshop, therefore, work on reforming the primary dealer system has started and you will be introduced to new guidelines that will control the system. primary dealers are financial intermediaries who promote investment in issued securities. in the developed securities market a primary dealer is licensed only after a long period as a demonstrated participant. however, the ghanaian wholesale market was started on a different note. in addition to a few licensed brokerage firms, all the banks and discount houses existing at the time were made automatic primary distributors. it was envisaged that with their wide coverage, the banks could promote the retail distribution of government securities. in march 1996, in consultation with dealers in the market, the bank of ghana stopped the retail market of treasury bills. it was envisaged at the inception of the wholesale auction that the primary market would be stimulated and broadened through increased competition for the evolution of a more efficient and dynamic secondary market. despite the interventions, the market is yet to exhibit the dynamism that characterizes financial markets in the advanced economies. a number of weaknesses account for the inability of our primary dealer system to produce the desired objectives. the proper functioning of a deregulated financial system and the implementation of indirect monetary controls require a substantially liquid inter - bank market for government securities. the reasons this has not happened include : – lack of commitment of the primary dealers to undertake government securities transactions as a line of business – the weak financial strength of licensed brokerage firms that do not have the required wide net work to reach the non - bank public – over 80 % of government securities are taken up and held by banks. these are seen more as investments rather than as trading stock, and have therefore tended to hold stocks of securities to maturity – government securities are seen by some banks and other

market provide benchmarks for the system as a whole. it is important to extend the yield curve, while encouraging public issues by corporates on the market. as government and the private sector bond and equity markets develop, ladies and gentlemen, they would facilitate the development of new products and in particular, facilitate the intermediation of funds more competitively and contribute to a culture of long term savings as an objective envisaged by the long term savings act. as a commitment to the development of the domestic capital market, the bank of ghana introduced the central securities depository ( csd ) system, which became operational in 2005. the depository has seen increasingly large volumes of activity in terms of transactions in equity. the system has curtailed unnecessary delays in settlement, and it minimizes fraud. this is expected to greatly enhance the automation of the trading system of the exchange. ladies and gentlemen, what we are seeking to develop is a capital market that will enable businesses to tap long term savings and investible funds. i am particularly happy that gradually corporates are increasingly moving in this direction and what we are witnessing today is a good example. it is important for the ghana stock exchange in collaboration with the sec to encourage market participants with diverse characteristics in terms of transaction needs, risk profiles and investment horizons, to a greater boost to the market. the long term savings act and the pending pension reform are bound to result in an increase in demand for long term debt securities. it is very important that we prepare ourselves through education to demystify the processes involved in listing and investing on the exchange and highlight its value as an avenue for raising medium to long term capital as well as making capital gains. distinguished guest, ladies and gentlemen, let me close by noting that it is important we all play our part in developing a deep and efficient market, which would help to channel domestic and international capital for investment in this economy. on this note, mr. chairman, let me once again congratulate the management and staff of ecobank for the successful listing on the exchange and wish them well as they contribute towards the development of the capital market in ghana. thank you very much for your audience.