‘Observer directors’ proposed for banks

The central bank should appoint two non-voting observer directors to the boards of all banks, while government-owned banks should have their board of directors appointed by the Public Accounts Committee (PAC) of Parliament, Emmanuel Adu-Sarkodee, Group CEO of CDH Financial Holdings has said.

Thefinancial analyst told the B&FT that the biggest challenge facing the banking sector is not lack of capital or high non-performing loans, but the lack or disregard of proper corporate governance.

“Instead of appointing independent and non-independent board members, since banks are essentially owned by shareholders and depositors whose monies they oversee, the central bank should appoint two directors to every bank’s board as observers or observer contributors.

“These observers shall not have a vote but hear everything you are saying, and they can contribute and report to the central bank. That way, you pick up the signals and things before they bite you. What is the point in charming a snake after it has bitten you? What is the point in waiting for the trouble to hit before you go and find out what happened?” he asked.

Asked if this would not amount to interference in the operations of banks by the regulator, Mr. Adu-Sarkodee said board minutes are already open to the central bank upon request anyway, whenever it undertakes supervision or inspection.

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“Instead of coming after these meetings or events have happened, they [Bank of Ghana representatives] sit in real time. Such individuals have no vote when matters come to a vote. He or she just sits in and listens to their arguments, contributes sometimes, and reports to the central bank,” he stressed.

Touching on government-controlled banks like the National Investment Bank (NIB), Agricultural Development Bank (ADB), Consolidated Bank Ghana (CBG) and GCB Bank, Mr. Adu-Sarkodee proposed that the Public Accounts Committee of Parliament should be made to appoint their directors.

“The perception that when a political party is in power government-owned banks are controlled by that party must not be the case anymore. In Parliament, the rule should be that you apply and when you meet the criteria and are properly vetted, then you are appointed. When you go through that, you will know that your responsibility lies with the people of Ghana and not the executive arm of government only.

“This will bring in more checks and balances. Yes, government has shares in these banks; but the real money used in running the affairs of these banks is depositors’ monies from the general public – and that must be safeguarded at all times,” he said.

Since August 2017, the banking sector has seen several upheavals. Seven banks have seen their licences revoked, while the race to meet the December deadline for the new minimum capital is leading to some mergers – with that between OmniBank and Sahel Sahara Bank already making the headlines.

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The central bank has had to introduce a series of directives on corporate governance, risk levels, limit on tenure of management executives, boards of directors, and increment of the sector’s stated capital from GH¢120million to GH¢400million – with its deadline looming large on the industry.

Due to the highly insolvent nature of these banks, government has so far spent GH¢8billion of taxpayers’ money to secure the deposits of savers in the seven collapsed banks. Some analysts point out that a total of GH¢12billion will be required for the sector to be properly cleaned up.

Mr. Adu-Sarkodee noted that should his proposal be implemented, the issue of banks collapsing every now and then will become a thing of the past.
“We need to have these changes because we do not need to see this crisis happen again. Every now and then you have banks failing. The key factor for banking failures in this country is corporate governance and not capital. Of course, capital is an issue because there is no substitute for capital in banking; but more importantly, our problems border more on corporate governance than capital,” he said.

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