The Bank of Ghana (BoG) raised the minimum capital requirement for the banks to GH¢400 million from GH¢120million by 31st December 2018, deliberately to strengthen the banks, Dr Ernest Addison, Governor of the BoG, has said during the GIMPA’s Biennial Law virtual conference.
This, he said, was a key policy aimed at strengthening banks to become more resilient, as well as strengthen their capacity to lend to better support economic growth.
He explained that at the end of the exercise in December 2018, the number of banks had reduced to twenty-three (23) either by shareholders raising capital, through mergers, by acquisition through other banks, or the Government-administered scheme called the Ghana Amalgamated Trust. The recapitalisation repositioned the banking sector and made it better capitalized, liquid, stronger, and more resilient.
The Bank of Ghana itself had to be reorganised and restructured, and several key reforms were implemented to address the causes of the systemic failures that took place.
“The approach was three-pronged, involving (i) Enhancements to the regulatory regime; (ii) Sharpening the Bank’s monitoring, supervision and enforcement tools; and (iii) enhancing capacity and addressing the ethical culture of Bank of Ghana’s supervisory departments and that of the industry.
“The key directives issued as part of the reform process were:•The Corporate Governance Directive to address the fundamental weaknesses observed in the governance of banks.
“These directives are to ensure that boards of regulated financial institutions are composed of directors who can exercise strong and independent oversight and ensure that the interests of all relevant stakeholders are protected. Also, that key management personnel have adequate qualifications, experience, and integrity to effectively manage these institutions; and that banks fully embed compliance with regulatory requirements and ethical standards as part of risk management frameworks, with compliance officers and Boards prioritising regulatory compliance; • A “Fit & Proper Person” Directive to help ensure that key shareholders, Board members, and key management personnel of banks possess the requisite knowledge, skill, and character commensurate with what is required for their roles; and •A Cyber and Information Security Directive to make banks more resilient to cyber-attacks.
The Bank of Ghana also introduced measures to sharpen the main instruments used in enforcing its supervisory rules. Specifically, • the Bank revamped its structures and procedures for licensing with more thorough due diligence and capital verification processes; • introduced an enhanced process for making new rules which involved a more structured stakeholder consultation process to transparency in the policy development process, and •instituted enhanced processes for examination (on-site and off-site) of regulated institutions, increased the frequency of on-site examinations, and strengthened accountability for supervisory follow-up of examination findings.
“Further, the Bank of Ghana has invested in a new state-of the art surveillance software. This new electronic surveillance system will help capture supervisory data from regulated institutions more accurately and prevent the high incidence of misreporting witnessed with the failed institutions. In addition, the software will enhance the analytical capacity of the supervision teams and help with more effective reporting of supervisory concerns for appropriate and timely interventions.
“More importantly, the Bank has increased resources to its Departments that regulate and supervise the financial sector. It has augmented the staff strength of the Banking Supervision, Other Financial Institutions Supervision, and Financial Stability Departments to enhance their capacity, drawing on existing skills within the Bank of Ghana as well as from the private sector.”