I shall become the Governor of the Bank of Ghana one day, I am not there yet but I will be there! History has it that, just two days before the declaration of Ghana`s political independence on 4th March 1957, the Bank of Ghana was formally established by the Bank of Ghana Ordinance (No. 34) of 1957, passed by the then British Parliament.

Frantic preparations then began to put in place an organizational structure for the new central bank. Believe it or not, by mid-July 1957, all was set for the official commissioning of the new ultra-modern Head Office of the Bank on the present Prof. John Evans Atta-Mills High Street.

During the opening address by the then Prime Minister at the end of July 1957, the Leader of Government Business (Prime Minister) stated with pleasure that the occasion marked the beginning of independent monetary administration in the newly independent Ghana – a cherished dream had at long last become a reality for the people of Ghana.

In fact, the principal objects of the new central bank, as enshrined in the 1957 Ordinance, were “to issue and redeem banknotes and coins: to keep and use reserves and to influence the credit situation with a view to maintaining monetary stability in Ghana and the external value of the Ghana pound; and to act as banker and financial adviser to the Government.

The opening ceremony paved the way for the Bank to commence formal banking operations on 1st August 1957, when the Banking Department opened for business. The Issue Department did not commence operations until July 1958. 

Since the days of Mr Alfred Eggleston who was appointed as the 1st governor of the bank of Ghana on 1st August 1957, Ghana can boast of 15 central bank chiefs over the last 62years with 26 deputy governors. They all served in their capacity to turn the economy and shaped the financial system in one form or the other.

Functions of the Central Bank of Ghana

·       formulate and implement a monetary policy aimed at achieving the objects of the Bank;

·       promote by monetary measure the stabilization of the value of the currency within and outside Ghana;

·       institute measures which are likely to have a favourable effect on the balance of payments, the state of public finances and the general development of the national economy;

·       regulate, supervise and direct the banking and credit system and ensure the smooth operation of the financial sector;

·       promote, regulate and supervise payment and settlement systems;

·       issue and redeem the currency notes and coins;

·       ensure effective maintenance and management of Ghana’s external financial services;

·       license, regulate, promote and supervise non-banking financial institutions;

·       act as banker and financial adviser to the Government;

·       promote and maintain relations with international banking and financial institutions and subject to the Constitution or any other relevant enactment, implement international monetary agreements to which Ghana is a party; and

·       do all other things that are incidental or conducive to the efficient performance of its functions under this Act and any other enactment.

Despite all these powers vested in the central bank, industry watchers earlier believed that it was a ‘’toothless bulldog who could not bite”.  Currently, that belief has lost its merit as the central bank has bared its teeth to live up to its objects. The question is what then has the Central Bank done differently?

Over the last few years, I can say that the current governor of the Central Bank, Dr Ernest Addison has played a major role in sanitizing the financial sector. He has so far proven to be the most firmed and most respected governor, applying the rules of the game without fear or favour to ensure the financial sector in Ghana is sanitized and aimed at restoring investor confidence in the industry.

This was evidenced when the Local banks reached out to the Presidency to intervene to relax the rules for the local banks on the Ghs400m recapitalization exercise for all the banks in Ghana.

In my view, by maintaining his stance he contributed greatly in ensuring that Ghana had resilient and stronger financial institutions. As I keep saying, Banking is serious business and should be devoid of any politics in Ghana.  

Again, the collapse and revocation of licenses, coupled with the purchase and assumption of 9 banks, the revocation of licenses of over 377 microfinance and microcredit companies and the recent revocation of the licenses of some Savings and Loans companies are very commendable.

Aside from this, several policy initiatives and interventions have been undertaken by the central bank to ensure that Ghana has a robust financial system. All these have been applauded by both local industry players and the international community and I hope that the steps taking by management and board to address the ailing financial sector shall be replicated in other African Banks and the world at large.

However, Mr Governor, there are still serious issues that need to be addressed for depositors and investors to believe that the financial sector has been truly sanitized. I hear you saying, the banking sector clean-up has been completed; this is a good step but there are teething issues.

If I were you Mr Governor, I would go a step further to take some stern actions besides the appointment of receivership and pumping some funds to pay off depositors. I may not be able to mention all of them here, but I hope to highlight a few points worth considering.

Go for the directors/shareholders of these Companies

It`s been two years since seven (7) banks went down, reports from Bank of Ghana cited a lot of ineffective corporate governance, close financial dealings in the administration of these institutions. Yet till date, not even a single soul has been prosecuted to serve as a deterrent to directors and shareholders who may have intentions to repeat the same.

Mr Governor, I do appreciate that the wheel of justice grinds slowly, but we want to see action. If I were you, these Directors’ assets and other properties, belongings would have been disposed of off to pay off depositors and investor funds with immediate effect.

Directors are the arms and legs of these companies and they must be held accountable for any losses that have occurred as a result of recklessness and undisclosed conflict of interest on their part.

Appointment of Receivers

In as a much as I don’t doubt the credibility of the appointed receiver for the case of the microfinance and microcredit insolvency as well as the Saving and Loans, I would have wished that a different receiver is appointed to handle the receivership of the 23 savings and loans companies.

In my view, this will speed up the process of paying depositors and investors. I had the chance to listen to Mr Eric Nipa on Citi 97.3fm, where he indicated that the problem they have identified after the receivership in the microfinance sector is bigger than they imagined.

This means that the funds allocated to pay off cherished clients locked funds will not be adequate. Again, the steps taken will go much longer to address than expected. To facilitate this process, a different stream of receivers could have been appointed to handle the transactions differently.

Bank of Ghana Employees involved in the mess

I work in a corporate organization where employees take ownership and take responsibility for their actions. I think it’s about time we went back to the records and the fundamentals to investigate which officers approved the licenses to be issued to these financial institutions. What has been the report from the Banking supervision department of the Bank of Ghana and how have they been digested to ensure that the right assessments were done before the decisions were taken.

For the last two years, I am yet to hear of any punitive action taken against those who were associated with all the financial crises. If I were you Mr Governor, Heads would be rolling by now, unless no one was involved in the entire process. The code of conduct in every organization guides employees in all their internal affairs. Elsewhere, key employees and managers who were involved and assisted these banks to go down should be penalized. As a regulator, it’s the responsibility to ensure that we don’t ‘spare the rod and spoil the child’. It appears staff are being covered up.

A thorough investigation of current companies with related business entities

Some of the numerous reasons for the collapse of major institutions and finance houses were about the fact that there were lots of related entities to the core business of the incapacitated firms and hence depositor’s funds were used in funding and supporting the other related businesses.

This became a major issue to the extent that, even loans and other funding supports didn’t go through proper credit appraisal and approvals process.

There were using depositor’s funds to run their operations illegitimately. I am not saying that having multiple business ventures is bad, however, if I were you Mr Governor, I would have ensured that through the banking supervision department or the appropriate department, all institutions shall publish their related entities, explaining clearly the sources of funding, declaring intercompany loans and all counterparty funding sources. Work closely with the Registrar General’s Department to go deeper into the shareholding structure of these financial and non-banking financial institutions. This should help to uncover weakness in the system and curtail feature occurrences.

Ripple effect from job losses on the economy

Though the bold decision has been taken to revoke the license of these firms, the magnitude of job losses looks underestimated. Some experts have argued that the cost of the financial clean-up is better today than the futuristic impact of not revoking these licenses.

Just like the impact of price adjustment on fuel in the economy, the ripple effect of these decisions is quite alarming. There is the potential for breadwinners of families to lose jobs and this will drive up the already high unemployment rate. Individuals who have funds locked up are even struggling to pay school fees of their wards, pay rent due among others.

 If I were the governor, I would have listened to the cry of these mothers on the market, who are wailing for assistance to no avail. As we are aware, the ripple effect of a magnificent financial meltdown can lead to a recession. It`s important that the receiver prioritizes the payments to customers and does it timeously.

A conscious effort should be made to retrieve and sell assets belonging to directors of these fallen companies to pay off clients as a matter of urgency. This is the only way I believe; a punitive action is taken.

Set up special prosecution court

Certain critical issues require some prompt actions. We are in a country with a complex and winding legal system where sometimes judgments are delivered after 3-5years. So many people have been involved with the insolvency of these institutions and I don’t think we should allow it to go through the traditional legal process. 

If I were the governor, I would plead with the Chief Justice to set up a special court to deal with financial matters, to speed up the investigation process and sentencing those who have in one form or the other misappropriated funds to jail.

Investors and depositors need their funds and I am not sure they are ready to wait for a longer period. Acting to deal with issues promptly is the only way to restore confidence to both domestic and international investors.

The auditor`s opinion and management responses

The auditing firms will always argue that they only give an opinion on financial statements that are prepared by management and approved by the Board.

Going through the notice of revocation of license of insolvent savings and loans companies and Financial houses issued by the Bank of Ghana on 16th August 2019, the document cited instances where the companies used ‘’creative accounting practices and under-provision for impaired loans, thereby misrepresenting their true financial condition to the Bank of Ghana and other stakeholders’’.

If I were the governor, I would collaborate and work with the licensed accounting and auditing firms to step up the game on their reporting standards in respect of financial institutions.

In conclusion, even though there are a lot of interventions to restore investor and depositors’ confidence, the fundamentals should be such that robust actions are taken to ensure that it serves as a deterrent to others. Today, I cannot assuredly say that these same mistakes would not be repeated by these institutions in the future. At least if there is a scapegoat, some lessons would be learnt.

Credit: Bank of Ghana, Miriam Amoako

Disclaimer: The views expressed are personal opinions and doesn’t represent that of the banks or the institution the writer work for.

About the writer

Carl Odame-Gyenti is a third-year PhD (Financial Management) candidate, a Finance and Telecom enthusiast, managing local and global Investors, Intermediaries, Non-Bank Financial and Financial Institution relationships with an international bank in Ghana. He has embarked on several international assignments in London, Singapore, Dubai, Kenya, Nigeria and Southern African markets. He has a passion for youth and community development.