Weak banking system undermines growth – Akufo-Addo
…as he spurs BoG on to deal forcefully with sector’s challenges
President Nana Addo Dankwa Akufo-Addo, in urging the Central Bank to remain steadfast in strengthening the banking sector, has said a weak banking system undermines economic growth.
“The need to entrench reputation and credibility in our financial system is crucial. A weak banking system undermines growth and on this basis, the current weaknesses in our banking sector needs to be addressed forcefully to minimise any adverse financial consequences to unsuspecting savers and the spill over effect on the economy,” he said.
Speaking at a 60th Anniversary conference of the BoG, the president said that a strongly regulated banking industry will not only guarantee financial stability but promote greater confidence in that sector.
“Your most recent measure in intervening decisively in the matters of UT Bank and Capital Bank demonstrates your preparedness to act in the manner worthy of a responsible Central Bank of a praiseworthy regulator. I am confident that you have the support of the nation,” the president added.
In August, 1957, the Bank of Ghana commenced operations as the industry’s regulator and this year marks 60 years of operations. To mark the event, the BoG organised a conference which saw economists and bankers deliver lectures on the theme ’60 years of Bank of Ghana: Achievements, Challenges and Prospects’.
Collaboration between BoG and gov’t
President Akufo-Addo noted that despite the operational independence of the Bank of Ghana, to sustain macroeconomic stability and rapid growth in a developing nation like Ghana, there must be partnerships and cooperation between the Central Bank and government.
“Full autonomy of the bank, however, does not mean that the bank’s monetary policy should be at variance with the government’s overall macroeconomic policies. With 60 years of experience, I believe we should learn great lessons both from our own history and from the experiences of other countries about how this partnership should work.
At age 60, whether it is in the control of the quantity of money, managing interest rates, safeguarding the domestic and external value of the cedi, or ensuring the soundness of the financial system, I urge the Bank of Ghana to reflect soberly on its experience, the good and hard times, and take lessons from the challenging times and focus on working to promote confidence in the economy and instil discipline in the banking sector,” he added.
He urged the bank to put in place policies that are both internally and externally consistent.
Dr. Ernest Addison, Governor of the Central Bank, assured that the bank will continue to strengthen the licensing requirements, regulatory and supervisory framework of banks and non bank financial institutions.
“Together with other relevant stakeholders, we will work to build a stronger industry, in a business friendly environment, by ensuring that banks have adequate capital to match their risk appetite,” he noted.
In a speech read on his behalf, the Finance Minister, Ken Ofori-Atta, noted that to remain one of the most open and stable economies in the region, Ghana requires the Central Bank’s direction on safeguarding the stability of the financial system and implementing a monetary policy that provides support for the government’s programme to support sustainable private sector growth and employment.
“The ministry will continue to support efforts by the bank in the realisation of its mandate through effective coordination of our institutions. Monetary policy is working to support government’s transformational agenda by ensuring the stability of the macroeconomic environment necessary for accelerated and sustainable growth,” he said.
He added that having seen significant reduction in the monetary policy rate this year, the expectation is to see more reductions in the coming months as the macro environment improves.
“We therefore encourage the Bank of Ghana to continue to conduct monetary policy with the aim of keeping inflation close to the target and the economy operating at its full potential and increase efforts at promoting a safe and efficient financial system as government is committed to make Ghana a financial hub.”