Editorial: New ‘Banking Code of Ethics and Business Conduct’ will improve professionalism

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Editorial: Banks’ preference lending to gov’t instead of private sector disturbing
Dr. Ernest Addison , Governor of BoG

The Bank of Ghana’s 2020 Banks & SDIs Fraud Report says the reported value of fraud for 2020 was GH₵1.0billion as compared to GH₵115.51billion recorded in 2019, and the central bank notes that this poses reputational risks to some banks.

It is noteworthy that despite the increasing rate of fraud cases-valued at GH₵1.0billion, the losses incurred by banks stood at GH₵25.40million as compared to an estimated loss of GH₵33.44million in 2019, representing a 24% decrease.

However, the same report indicates that 51% of the reported cases involved staff – lending fear that the phenomenon can be attributed to poor remuneration, limited background checks, and a lack of corporate governance.

In view of this growing trend, it is gratifying to learn that the Chartered Institute of Bankers Ghana, in collaboration with the Bank of Ghana and the Association of Bankers has introduced a new Banking Code of Ethics and Business Conduct to help rebuild the industry’s sinking image.

The code will guide the conduct of bankers and banking sector employees in the country; and more importantly, blacklist those who deviate from industry standards and ethics. This, we believe, will stem the tide of persistent fraud cases involving bank staff and bring about the desired attitudinal change and trust that is so crucial to survival of the sector.

Indeed, President of the Chartered Institute of Bankers (CIB), Reverend Mrs. Patricia Sappor, believes the new code of ethics will help raise standards and instil professionalism among bank staff – and that is precisely what will assuage the fears of customers and restore the needed confidence.

It is to be recalled that the Bank of Ghana had to revoke the Class 1 banking licences of nine banks during the financial sector clean-up, and receivers of the collapsed banks have been able to recover a little over GH₵700million as at the end of 2019 out of GH₵10.1billion funds that were advanced to the customers of those banks.

In the fraud report, the Bank of Ghana attributed the surge to the COVID-19 pandemic which resulted in a spike in the use of digital/electronic platforms for financial transactions.

The financial sector clean-up and refund of monies to depositors have restored investor confidence and protected the hard-earned savings of millions of Ghanaians. But it came at a huge cost of over GH₵21billion to the state.

Leverage on mineral wealth to boost revenue mobilisation…

Fiscal policy think-tank, the Institute for Fiscal Studies (IFS), is pressing for the state to take over the commanding heights of Ghana’s extractive sector to increase government revenue generation from the nation’s mineral and oil resources.

IFS notes that compared with other developing economies Ghana’s revenue generation from the extractive sector is poor.

Presenting the IFS’ latest research on the extractive sector’s role in Ghana’s low public sector revenue mobilisation, a Senior Research Fellow of the Institute, Dr. Said Boakye, said the proportion of extractive sector value added that flows to government as revenue is just 19.3 percent in Ghana compared with an average ratio of 49.7 percent for other developing economies.

At the same time, the proportion of value from mineral production that flows to the Ghanaian government as revenue is a mere 6.5 percent compared with 51.8 percent in Botswana – a major diamond producer.

Unlike Ghana, the government of Botswana has huge ownership interests in the country’s mining sector. The government of Botswana has 50 percent interest in Debswana, the country’s main diamond producing firm.

Hence, IFS proposes that government, as a matter of urgency, should purchase controlling interests of not less than 55 percent in the Ghanaian operations of all the large-scale mining companies.

“This should not be done in terms of mere equity holdings. Rather, the large-scale mining companies’ operations in Ghana should be turned into joint-venture arrangements between the government of Ghana and foreign investors – either in terms of profit sharing or, preferably, production sharing.”

Similarly for oil, government’s revenue as a ratio of the value of production averaged 17.9 percent in 2015-2018 compared with an average of 51.6 percent received by the Nigerian government during the same period.

This is because the Nigerian government is largely in control of that nation’s oil sector whereas Ghana has a limited stake in its oil sector. Our penchant for ‘private sector’ participation only goes to favour, largely, the investing entity because of capital requirements.

However, we have the mineral resources embedded within our soil and therefore it stands to reason that the nation’s equity be so significant.

Furthermore, government has been urged to aim at having fully state-owned firms operating in the oil and mining sectors, because “government stands to enjoy the entire net financial benefits from the extraction of oil and mineral resources in Ghana if these resources are fully extracted by state-owned oil and mining firms”.

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