Break up the Central Bank – Frank Adu

The Bank of Ghana is overburdened with too many responsibilities and need to be broken up into different regulatory institutions to serve specific needs, Frank Adu Jnr., Managing Director of CalBank, a local bank, has said.

“Why must the Governor be saddled with banking supervision when he is also worried about monetary policy? You can have a whole institution that can handle that and then the Non Bank Financial Institutions (NBFIs) can come under that institution as well,” he said.

To Mr. Adu the Banking Supervision Department (BSD) of the BoG cannot be fully blamed for the challenges currently facing the banking industry.

“We are blaming the BSD for all the problems in the banking sector but this department can be constituted and made into a body standing on its own. For the BSD to do its work, it needs about 2,000 workers to carry out effectively its work of supervision.

They simply do not have the resources to carry out the supervision we need in an economy which has over 400 NBFIs and more than 30 banks, especially with the implementation of the latest International Financial Reporting Standards (IFRS), which have very complicated processes,” he added.

Ghana’s financial sector has seen rapid developments over the past two decades. With the opening up of the sector in the early 2000s, new banks have entered the market from Africa and other parts of the world to deepen competition while NBFIs including savings and loans, microfinance and finance houses have also entered the market.

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Currently, the sector has 34 licensed banks; four foreign banks with representative offices in Ghana; 37 savings and loans companies; 23 specialised deposit-taking institutions; three finance and leasing companies; 140 rural and community banks; 269 microfinance companies; 42 money lenders; two remittance companies, two leasing companies, one mortgage company, 431 forex bureaux, and eight Financial Non Governmental Organisations (FNGOs)

All of these institutions are under the direct and indirect regulation of the Central Bank including credit unions, susu collectors and the mobile money operations of the telcos. The BoG has only partly relinquished supervision of rural and community banks to the Association of Rural Banks (ARB) Apex Bank.

Over the past five years, challenges including the collapses of microfinance companies and a couple of banks have led to industry watchers and players placing the blame not just on managers of these institutions but the Central Bank for lack of proactive measures but rather resorting to actions that are late and dwindle the confidence in the market.

Speaking at the bank’s turn at the stock exchange’s Facts Behind the Figures, Mr. Adu explained that the economy is becoming more bigger and complicated and therefore the Central Bank’s role has expanded beyond the scope it was 30 years ago when he started out in the industry.

To buttress his point, he cited the example of the United Kingdom (UK) which has the Financial Conduct Authority, established in 2013, whose responsibility is to regulate the conduct of financial institutions in the UK. Meanwhile, the UK also has the Bank of England which solely regulates and manages monetary or financial policy.

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A search on its website read: “The Financial Conduct Authority (FCA) is the conduct regulator for 58,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms.”

Wikipedia went on to explain that the FCA is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The FCA regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom.

It focuses on the regulation of conduct by both retail and wholesale financial services firms. The authority has significant powers, including the power to regulate conduct related to the marketing of financial products. It is able to specify minimum standards and to place requirements on products. It has the power to investigate organisations and individuals.

In the United States, the Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charterregulate, and supervise all national banks and thrift institutions and the federal branches and agencies of foreign banks in the United States.

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