Repo market is pillar of financial stability – Dr Mumuni

The First Deputy Governor of the Bank of Ghana, Dr Zakari Mumuni, has underscored the critical role of repurchase agreements (repos) as a foundational pillar of modern financial systems, stressing that the strength of any financial market is determined not only by trading volumes but by the robustness of its legal and operational infrastructure.

Speaking at the Bank of Ghana and Frontclear Market Training Workshop on Repo Guidelines, GMRA, and ISDA documentation for 2026, Dr Mumuni said Ghana’s rapidly expanding financial markets must be matched by equally strong frameworks governing risk, documentation, and legal certainty in order to ensure long-term stability.

He warned that while market activity reflects growth, it is the underlying systems—contracts, collateral frameworks, and risk governance—that determine resilience in times of financial stress.

Repo market as a pillar of modern finance

Dr Mumuni emphasised that a well-functioning repo market is a critical component of any modern financial system, serving as a key channel for short-term liquidity management and funding across financial institutions.

He explained that repo transactions allow market participants to efficiently mobilise securities as collateral, improve liquidity conditions, and enhance the transmission of monetary policy across the economy.

However, he cautioned that these benefits can only be fully realised when market participants have a clear understanding of the rules governing transactions, including their legal obligations and operational risks.

According to him, without strong legal clarity and risk awareness, even active markets can become fragile under stress conditions.

GMRA as legal backbone of repo transactions

Dr Mumuni highlighted the Global Master Repurchase Agreement (GMRA) as a globally recognised legal framework that underpins repo transactions.

He explained that the GMRA defines counterparty rights and obligations with precision and establishes clear procedures for default management, margining, and close-out netting.

These mechanisms, he noted, significantly reduce legal uncertainty and strengthen confidence among market participants, particularly in complex or high-volume trading environments.

He stressed that the adoption and understanding of such international standards are essential for deepening Ghana’s financial markets and aligning them with global best practices.

ISDA framework for derivatives and risk management

The First Deputy Governor also drew attention to the importance of International Swaps and Derivatives Association (ISDA) documentation in supporting derivatives markets and broader risk management activities.

He said ISDA agreements provide the contractual foundation for hedging instruments, defining critical aspects such as payment obligations, collateral arrangements, default events, and close-out netting.

According to him, these provisions are essential for maintaining order and predictability in financial markets, particularly as Ghana’s market instruments become increasingly sophisticated.

He added that strong derivatives frameworks enable institutions to better manage exposure to risk, thereby contributing to overall financial stability.

Bridging market growth and financial infrastructure

Dr Mumuni noted that Ghana’s financial markets are evolving rapidly, with a growing fixed-income sector and increasing participation by a new generation of financial professionals.

However, he stressed that this growth must be supported by deliberate investments in legal literacy, risk management frameworks, and operational discipline.

He explained that market development without corresponding infrastructure expansion could expose the system to avoidable vulnerabilities.

Integrated approach to financial transactions

The workshop, he said, was intentionally designed to bring together Treasury, Risk, Legal, and Operational functions within financial institutions.

Dr Mumuni emphasised that no financial transaction can be properly executed without coordination across these key departments.

He described them as a “critical tripod” of financial market integrity, warning that weakness in any one area can compromise the entire system.

Call for stronger risk awareness and market discipline

Dr Mumuni encouraged participants to actively engage in discussions during the training, particularly on complex issues such as collateral management, legal enforceability, counterparty risk, and operational readiness.

He stressed that the real value of the workshop would not lie in presentations alone, but in the quality of engagement and the practical knowledge participants take back to their institutions.

Building a rules-based financial system

In his closing remarks, the First Deputy Governor stated that Ghana’s financial markets must not rely on informal practices or unclear agreements.

He stressed the need for legally enforceable contracts, robust operational systems, and professionals with a deep understanding of financial instruments and their associated risks.

Dr Mumuni reaffirmed the Bank of Ghana’s commitment to strengthening financial market infrastructure, deepening liquidity, and aligning domestic standards with international best practice adapted to Ghana’s context.

He also commended Frontclear, ACI Ghana, and partner institutions for their role in supporting capacity building and market development.

According to him, the long-term integrity and resilience of Ghana’s financial system will depend on continuous investment in both people and systems that support sound market functioning.