Ghana’s banking regulation ‘fundamentally wrong’ – Dr Atuahene

Ghana’s banking regulation ‘fundamentally wrong’ – Dr Atuahene
Source: Ghana | Myjoyonline.com | George Nyavor | george.nyavor@myjoyonline.com
Date: 11-09-2019 Time: 10:09:31:am
Dr Richmond Atuahene is a banking consultant

Banking Consultant, Dr Richmond Atuahene, has called for an objective discussion on Ghana’s banking regulation, describing the current system as “fundamentally wrong.”

Speaking at the 3rd edition of the Joy Business Financial Services Forum on Tuesday, Dr Atuahene cited the section of the Constitution that set up the banking sector regulator – the Bank of Ghana – as one of the problems working against the independence of the Governor of the central bank.

“There is something fundamentally wrong with our banking regulation. Section 183 of the Constitution set up Bank of Ghana, but the sad thing is that the appointment of the Governor is tied to the ruling government,” he laments.

He noted that in other jurisdictions like England and South Africa, the work of the Governor of the central bank is rigorously independent of political meddling.

Citing England, he said “Mr Mark Carney, who is a Canadian, after the financial crisis, the Bank of England could not get anybody, they brought him there,” making the point that persons with competence and merit should be selected and appointed to head the central bank.

The Joy Business Financial Services Forum, where Dr Atuahene made these comments, was held at the Labadi Beach Hotel on September 10 on the topic ‘The Financial Services Sector Clean-up; Now What?'

The forum featured other speakers like Mr Osei Gyasi, Head of the Banking Supervision Unit of the Bank of Ghana; Rev. Daniel Ogbarmey Tetteh,  Director General of the Securities and Exchange Commission (SEC) and Mrs Marian Barnor, a Corporate Governance Consultant.

JoyBusiness Financial Forum

Dr Richmond Atuahene said it was unfortunate that the Constitution has tied the appointment of the Governor to the ruling government.

 He said it makes it highly possible for the Governor to “...dance to the tune of the person [who appointed him].”

“I have done a lot of work on the [Ghana’s banking] regulation and there is something fundamentally wrong. SEC [which is in charge of an aspect of financial regulation] is not a constitutionally set up institution,” he stressed.

“Going forward, there must be a frank discussion about our regulation architecture,” he urged.

Watch his full submission below.

Financial crisis


The 14th of August 2017 set off a chain of events to the chagrin of many in the Ghanaian economy: two big local financial institutions that were synonymous with the Ghanaian dream of growing a company from nothing to something came crashing leaving a trail of job losses, panic and high level of despondency.

UT Bank Ltd and Capital Bank Ltd had their licenses revoked by the Regulator, the Bank of Ghana and some assets and liabilities absorbed by Ghana's oldest local bank, GCB Bank. This purchase and absorption arrangement mitigated the potential negative spillovers the complete winding down of these banks would have brought.

GCB Bank became the new home for the customers of UT and Capital Bank at a cost of GHS 2.2 billion and calm was partially restored but many kept an eye out. 352 days down the line another hammer was dropped on the banking sector. 5 banks that had names resonating in every corner of the country ceased to exist and a new bank was formed to take again some assets and liabilities just as we witnessed with UT &  Capital Bank. The banking sector was under the microscope again. This time, the level of interconnectedness of these banks to other parts of the financial sector began to rear its head and yes it wasn't pretty. The effects of this action reverberated across the length and breadth of the business world and even the national treasury, costing the taxpayer an initial GHS5.7 billion.

Related: Cost of financial sector clean up to hit GH¢21 bn by end of year

Total cost shifts up as some banks could not meet a deadline for an increase in their minimum capital requirement from GHS 120 to 400 million. The national kitty is down an estimated GHS 11 billion to the banking sector alone. On the other end of the financial system, the securities industry was reeling from a problem that could cripple the business of investments.

The industry had its fair share of problems but had also been exposed to the problems of the banking, as banks are storehouses of funds for these institutions and in themselves an investment option by the fund managers. The interrelation of these institutions can spell doom and gloom if it runs askew.

The regulator of the market also took some steps to deal with the weeds in the grass by closing down some institutions and instituting some reforms. In recent times the insurance industry has also had to deal with some bad nuts and ensure reforms are shaped to address dynamism in the market.

In recent days, the Specialised Deposit-taking institutions comprising savings and loans companies and finance houses have been placed on the chopping board.

A number of institutions had their licenses revoked and placed under receivership through which customers will be made whole. The regulator cites a plethora of reasons, but at the core of this is regulatory forbearance and weak corporate governance with its concomitant effects.

The regulators have said the economy has gone through a rough patch and the waters are calm. But is it really?