Examine some of the difficulties associated with the financial system and how these challenges have been addressed by the Banks and specialised Deposit Taking Institution Act 2016 (Act 930)
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The Banks and Specialised Deposit-Taking Institutions Act 2016, Act 930, is the primary statute governing banking ... Within the past three years, the Bank of Ghana (BoG) undertook banking sector reforms to strengthen and to inspire confidence in the financial system. This led to a number of banks and specialised deposit-taking institutions (SDIs) having their licences revoked. The BoG announced that the banking- and SDI-sector reforms have been concluded. However, the government of Ghana will continue to pursue a policy that provides appropriate mechanisms to minimise financial system instability and deal with emerging risks using effective supervision and regulatory measures. Through the policy, the government seeks to make the financial sector of the country the preferred source of finance for domestic companies and further develop, strengthen and modernise the financial sector to support the government’s economic vision and transformational agenda. The BoG supports the general economic policy of the government by promoting economic growth, effective and efficient operation of banking and credit systems in the country. The BoG, to create a stable and efficient financial system, still has the following on its agenda:
increased disclosure requirements for financial institutions in line with Pillar III of the Basel Accord;
strong capital adequacy of financial institutions so that they will be Basel II and III compliant;
effective supervision and regulatory measures;
enforced strict compliance with all directives, including the Capital Requirement Directive (Pillar I) of the Basel II Accord and International Financial Reporting Standard 9;
finalised implementation of Pillar II of the Basel II Accord;
fully implemented consolidated supervision alongside revisions to the BoG’s Risk-Based Supervision Framework;
enhanced cooperation with other financial sector regulators and relevant foreign regulators; and
certainty that banks develop, adopt and implement plans to scale up financial inclusion and sustainable banking efforts to support the achievement of the Sustainable Development Goals, deploying emerging technologies on the back of the new interoperability framework.
Primary and secondary legislation
Summarise the primary statutes and regulations that govern the banking industry.
Act 930 of the Banks and Specialised Deposit-Taking Institutions Act 2016 is the primary statute governing banking industry in Ghana. This came into force on 14 September 2016 to repeal the Act 673 of the Banking Act 2004. The new banking law has consolidated the laws relating to deposit taking and regulates institutions that carry on deposit-taking business. It does not apply to credit unions and leasing companies that are licensed and supervised under Act 774 of the Non-Bank Financial Institutions Act 2008.
The new Act is wider in scope compared with the repealed Act 673 of the Banking Act 2004 and has given the BoG increased supervisory powers.
A concept of financial holding company has been introduced under the new Act. A person will not be permitted to serve as a financial holding company of a bank save where it has registered with the BoG. The BoG is vested with the powers to exempt a foreign bank or other foreign company from the registration requirements of a financial holding company. The BoG may grant that exemption to a foreign bank or other foreign company provided it is regulated and supervised in another jurisdiction. There should be some evidence that the foreign bank or company is supervised on a consolidated basis in its home country or another host country where it has substantial operations.
It imposes personal liability on principal officers or directors of a financial institution for non-compliance with a regulatory requirement.
It gives the BoG the power to formulate corporate governance directives and rules for financial institutions in Ghana, such as:
Act 931 of the Ghana Deposit Protection Act 2016, in force on 14 September 2017. It provides for the creation of a deposition protection scheme, a deposit protection fund, Ghana Deposit Protection Corporation (GDPC) and other related issues, and seeks to give protection to small depositors in the event of bank failure;
Act 612 of the Bank of Ghana Act 2002 establishes the BoG as the Central Bank of Ghana with a primary function to regulate, supervise and direct the banking system and credit system to ensure the smooth operation of a safe and sound banking system.