The Bank of Ghana has reiterated that sanity and confidence in the banking industry has improved significantly due to the Corporate Governance directive introduced in 2018 and some other measures.

The country’s financial sector was negatively impacted few years ago, due to dominant role by some shareholders in the governance of the banks, weak controls, regulatory breaches, among others.

According to the Deputy Head of Banking Supervision, Ismail Adam, the impact of covid-19 pandemic on the economy which the banks were able to withstand the shocks is a clear testimony that the industry is sound and safe now.

Speaking at the UPSA Quarterly Banking Roundtable on the topic “Banks, Corporate Governance and Risk Dealings”, Mr. Adam said “I must say this governance code together with other reforms that have been undertaken by the Bank of Ghana has brought sanity into the banking space, as I will later show you figures. This is also being complemented by the Company’s Act that was issued in 2019, Act 992 which also has a lot of disclosures, all aimed at improving the governance structure and systems in our institutions in Ghana.”

Mr. Adam pointed out that corporate governance is becoming a topical issue in the world today because of company failures, citing examples of collapse of Enron and Lehman brothers.

“When it comes to banking business, the most important stakeholder is the customer who is putting his money to you to trade with. Corporate governance is becoming a topical issue in the whole world including academia because of the history of corporate failure like Enron and Lehman Brothers. You can talk of the need to protect the stakeholders including the customer whom I said that in banking business is the most important stakeholder”.

He added that banking thrives on trust and therefore without trust there is no banking business, explaining further that “so this governance code was introduced just to bring public trust in the banking business and it has fulfilled its mission.

For his part, the Chief Operating Officer of Absa Ghana, Michael Mensah Baah corroborated the assertion by Ismail Adam, but added that a balanced mix of females and males who take less risk and males brings efficiency and effective decision making.

“Following the publication of the Corporate Governance directive in 2018 and Fits and Proper Directive in 2019, this has gone to complement the already existing corporate governance requirements that banks were supposed to adhere to. And I will agree with Mr. Adam that having put out this directive, boards and senior managers of banks are now clear in their minds that they are now in position of responsibility and trust, and therefore they need to ensure that the organizations they managed is in adherence to this directive. They need to ensure that they are complying with all this directive”.

“In addition, I will like to say that as a result of the interest that has been shown by the public and the Bank of Ghana moving to come out with this directive, public confidence has improved in the financial sector in terms of our ability to adhere to all the corporate governance requirements. I must say that even being able to withstand the covid-19 pandemic is a testament to some of the strong fundamentals that have been put in place following the banking crises.”

Between 2017 and 2019, the Bank of Ghana undertook lots of cleanup in the banking sector and this cleanup was basically due to corporate governance failures in most of the banks.