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RECAPITALIZATION EXERCISE REPOSITIONS BANKING SECTOR―DR ADDISON

Dr Ernest Kwamena Yedu Addison, Governor, Bank of Ghana (BoG), has pledged the commitment of BoG to promoting a safe, sound, stable and resilient financial sector, counting on the co-operation of all stakeholders.


Dr Addison, therefore, urged shareholders of banks to exercise control over these institutions, primarily in the interest of depositors, creditors, employees and other stakeholders, rather than for the benefit of shareholders.

He noted that the just-ended recapitalization exercise by BoG had re-positioned the banking sector as better capitalized, liquid, stronger and more resilient.

Furthermore, he said, the on-going strengthening of the regulatory and supervisory framework of BoG would also ensure that the banking sector was well-governed, well-managed and better-supervised to restore and maintain the much-needed confidence in the sector.  

Addressing a news conference in Accra on Friday, January 4, 2018, the BoG Governor gave the assurance that Bank Boards would be composed of persons capable of exercising strong and independent oversight and able to ensure that the interests of all relevant stakeholders were protected, while risk management would be integrated in the strategic focus of the governance and management of these institutions.

Dr Addison said compliance with regulatory requirements and ethical standards were embedded in the overall risk management system, while BoG’s supervisory systems, processes and teams were now better able to identify early warning signs, enforce regulatory requirements and ensure that prompt corrective action was taken by banks to recover quickly from any signs of distress.

He said BoG had had to take painful, but necessary, steps to clean up the banking sector so as to reposition it to support the economic growth and government’s transformation agenda.

The current Management of the BoG took office in early 2017, facing a number of  banking sector challenges, having inherited a financial system under a considerable state of distress, including inability of some banks to meet their capital adequacy requirements, while the capital of others eroded with high non-performing loans.

Some of these banks were insolvent and illiquid and others solvent but illiquid―a state of affairs largely the result of poor corporate governance, false financial reporting, and insider dealings.

BoG responded to the situation by continuing to provide liquidity support to these failing banks, without addressing the underlying problems that led to their illiquidity and insolvency.

The financial system then reached a tipping point, leading to the need for a comprehensive reform agenda, with the objective of cleaning up the sector and strengthening the regulatory and supervisory framework for a more resilient banking sector.  

As part of this reform exercise, the banking licenses of seven (7) insolvent banks were revoked over the last sixteen months, while steps were taken to ensure that they exited the market in an orderly manner.  

On September 11, 2017, BoG issued the Minimum Capital Directive (BG/GOV/SEC/2017/19) by which all universal banks were required to increase their minimum paid-up capital to GHC400 million by December 31, 2018.

Source: G.D. Zaney, Esq.

Created: 08 January 2019
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