BoG must enforce laws stringently to maintain financial sector confidence

If the central bank means to maintain growing confidence and resilience in the financial sector, it must ensure that there is total compliance and enforcement of the new directives introduced over the past two years, Dr.  Richmond Atuahene – a banking consultant, has said.

“The Bank of Ghana should sanction them [offenders] appropriately for non-compliance of the directives by the revocation of licences and prosecuting shareholders, directors and key management personnel who persistently flout the directives as is done in the Nigerian jurisdiction,” he said.

Dr. Atuahene was speaking at a Continual Professional Development Programme organised by the Chartered Institute of Bankers (CIB) in Accra. He spoke on the theme ‘Restoring confidence and building a resilient banking system in Ghana: From Bank of Ghana’s corporate governance perspective’.

He stressed that should the Corporate Governance Directive of the Bank of Ghana be implemented and enforced to the letter, it will ensure that depositors’ funds remain safe and that the financial system remains stable and resilient, thus contributing significantly to overall growth and development of the Ghanaian economy.

The financial sector, for the past two years, has seen significant reforms which led to the revocation of nine universal banking licences; three mergers involving six banks; a voluntarily exit of one bank; and conversion of the universal licence of one to a savings and loans status for not meeting the stated capital by the deadline.

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According to the International Monetary Fund’s (IMF) March 2019 exiting report, the total bailout of the banking sector cost the country GH¢13billion – which is far bigger than the 2019 country’s total capital budget expenditure, with establishment of the Ghana Amalgamated Trust also costing an additional GH¢2billion.

Despite the huge cost to the taxpayer, today the banking sector has 23 banks with each having at least GH¢400million and a raft of guidelines on corporate governance, credit analysis, and risk which the BoG expects will reshape the industry.

The BoG is also addressing specific risks from high NPLs and poor risk management systems, embarking on roll-out of the Basel II/III supervisory framework, and ensuring implementation of IFRS 9 by all banks.

As part of the new Corporate Governance Directives, the BoG has specifically defined the roles for each member of a board, their tenure and age-limit, and board structure among others.

Despite the detailed nature of the Corporate Governance Directives, the Bank of Ghana is also reviewing risk management guidelines for adoption by the industry to make sure banks and special deposit taking institutions undertake prudent risk assessments in their work.

Other guidelines and directives that have also been introduced are guidelines on mergers, acquisitions, ownership and control; guidelines for financial holdings companies; and outsourcing guidelines among others.

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The regulator is also expected to roll-out implementation of the deposit insurance scheme established under the Ghana Deposit Protection Act, 2016 (Act 931), while introducing Banking Sector Cyber and Information Security Guidelines to protect consumers and create a safer environment for online and e-payments products in line with government’s interoperability objective.

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