GHANA ASSOCIATION OF BANKERS - 17th ANNUAL WORKING LUNCHEON
KEYNOTE ADDRESS
BY
DR. ERNEST ADDISON - GOVERNOR, BANK OF GHANA
13TH SEPTEMBER 2019
KEMPINSKI HOTEL, ACCRA
Mr Chairman;
The Executive Secretary;
Members of the General Council;
Managing Directors of Banks;
Fellows and Associates of the Ghana Association of Bankers;
Members of the Banking Fraternity;
Distinguished Guests;
Ladies and Gentlemen;
1. A very good afternoon to you all and let me extend my warm greetings and welcome you to the 19th
Annual working luncheon of the Ghana Association of Bankers (GAB). It is indeed a great pleasure to be
invited to address this working luncheon of the Ghana Association of Bankers, bringing together Chief
Executives of Banks in Ghana.
2. To begin, allow me to highlight the critical role of the banking sector to the national development agenda.
The growth experience of the banking industry is necessarily intertwined with that of the economy as a
whole. And the industry has necessarily been central to economic policy and structural reforms because a
sound and efficient banking system is indispensable for financial stability and indispensable for a healthy
and robust economy.
3. Mr. Chairman, we have gathered here at a time of completion of actions to reform our financial sector
and a time when a lot of gains have been made in country's monetary and financial stability, and
confidence is being restored. These gains should begin to translate into lower interest rates that Ghana
pays for issuing debt, as well as lead to further anchoring of inflation expectations at the low and stable
levels and financial stability.
4. However, our ability to maintain this confidence depends on the freedom with which the central bank is
able to take necessary but unpopular decisions to restore price and financial stability. I would want to say
that the Bank of Ghana has enjoyed considerable political support enabling it to be effective to implement
these rather difficult measures to comprehensively reform the banking and specialized deposit taking
institutions sectors of the financial system. These have involved, increases in the minimum capital of
universal banks, resulting in some cases mergers and acquisitions, to ensure orderly consolidation of the
sector. And in some cases involving insolvent institutions without any franchise value, where licenses
were revoked. These reforms have rather sadly been misconstrued as being driven by some unseen
hands to score political objectives.
5. Ladies and Gentlemen, I would like to place on record that these difdficult decisions taken by the Bank of
Ghana were based on its technical assessment and judgment of the conditions facing the financial sector.
In particular, I would like to take this opportunity to clarify the misinformation about the circumstances
surrounding the license revocation of the Heritage Bank. We were quite measured not to engage with the
directors of the Bank at the time, but sometimesit pays to clarify such actions to avoid misperceptions.
During our assessments of this bank, we were able to unravel the financial engineering that went into the
creation of false capital upon which the then Heritage Bank obtained its license. The Heritage Bank did
not have the initial GH¢120 million capital required to obtain the Universal Banking license that was
granted in 2016. In fact, the shareholders and directors of the Heritage Bank had roundtripped on a
GH¢30 million payment made by Cocobod to Alive Industries, a related company belonging to the
principal shareholder-bank statements and the transaction documents are available for those who are
interested to review.
Discriminatory Reforms
6. There has also been some assertions that the Bank of Ghana has allowed banks that were not able to
raise the minimum capital by the deadline to continue even after the deadline. I am sure you all followed
the debate on the need to support indigenous banks which received a favourable response from the
Government through the creation of the Ghana Amalgamated Trust. The Banks that received support
from GAT met the qualifying criteria of being better governed and well managed. What is being perceived
as discriminatory should rather be seen as the reward for better corporate governance and good
management. That was the qualifying criteria. With the exception of the two state-owned banks (ADB
and NIB), the private banks that received assistance were assessed and considered better managed than
those that had their licenses revoked.
Section on Bailout or Resolution
7. Now, the question on people's minds is whether Bank of Ghana could have used the bail-out money to
keep the banks in operation. Ladies and Gentlemen, such reasoning suggests a lack of understanding of
the fundamental issues at play. Let me say that the underlying factors that accounted for the resolution
of the banks were deeper than liquidity issues. Here, one can mention very serious infractions, weak
governance structures and related-party transactions which rendered those defunct banks insolvent. I will
not rehash these issues but rather look forward to the emergence of a stronger and well-capitalised
banking sector, and as major stakeholders of the financial sector, we should all commit ourselves to
never roll back the gains we have achieved in the industry. The Bank of Ghana is confident that the
actions taken in terms of recapitalisation, closure of insolvent banks and widespread regulatory reforms
will gradually bringing back trust and confidence in the Ghanaian banking sector.
Restoring the Health of the Banking Sector
8. Ladies and Gentlemen, I have every reason to feel confident about gains and achievements made so far
in the financial sector. The financial sector is currently healthier and better able to withstand external
shocks compared to the financial sector at the beginning of 2017. It is better capitalized, liquid,
profitable, and more efficient and has adequate capital buffers to enable it manage any adverse external
developments. Such an optimistic outlook seemed nearly impossible in 2017 when we started these
reforms.
9. Mr. Chairman, a dynamic growth-oriented financial system must be strong, well capitalised, and
effectively supervised within a fair regulatory environment in accordance with international best practices
and standards. There is therefore, a huge regulatory burden on us to remain vigilant towards all forms of
risks in the banking sector and to tighten our regulatory and supervisory responsibilities to continue with
efforts at strengthening and stabilizing the banking industry. These reforms will ensure the safety and
soundness of banks, aligning macro and micro-prudential risks to bank capital and addressing cross-
sectoral and cross-border risks to the industry. In other to address potential risks and to properly risk
profile individual banks, we are taking steps to revise the current risk-based supervision framework in line
with current developments in the global banking environment.
10. To further boost depositors' confidence and lock-in the reform process, the Deposit Insurance Protection
Corporation (DIPC) would become fully operational effective October 1, 2019. The deposit insurance is
one of the key pillars in securing financial sector stability. As Amended, the Ghana Deposit Protection Act
2016 (Act 931) was enacted to protect small savings from losses incurred as a result of the occurrences
of an insured event such as the revocation of a Deposit Taking Institution's license. Among others, the
Act also supports the development of a safe, sound, stable and efficient market-based financial system.
In the process of operationalising the DIPC, the Bank has already sent letters to banks to begin a process
of onboarding after agreeing on an annual premium of 0.3 to 1.5 percent of insurable deposits with
participating institutions. The Bank of Ghana, which is the Project Implementation Authority, will support
the DIPC for 3 years to ensure sustainability. The agreed payout in the event of bank failure and the
revocation of licenses have been pegged at Gh¢6,250 per customer for banks and Gh¢1,250 per
customer for Specialised Deposit-Taking Institutions.
Consolidating the Gains
11. Going forward, we expect access to credit to be on a predictable and cost effective terms as part of the
benefits of the reforms and this week we have met with every bank and discussed ways in which these
results can be realised by the end of the year. And such a successful outcome would depend on
macroeconomic policies and reforms in the financial sector. But it will also depend on the private sector's
own initiative, resourcefulness, and capacity to take advantage of opportunities that have been created
by the reforms. We are aware that the clean-up of the MFI has led to a sharp fall in deposit rates of MFI
in Ghana, as depositors would rather save with strong well managed institutions than chase yield. This
should have a knock on effect on all deposit rates in the financial sector.
The Receivership Process
12. Ladies and Gentlemen, let me now turn to update you on the receivership process and the progress that
has been made so far. We remain confident that despite the initial hiccups associated with records the
receivership process has progressed steadily.
The receivership process has progressed steadily in line with expectations and include the following:
i. Validation of the financial position of the defunct banks;
ii. Realization of assets/recoveries; and
iii. To settle creditors and engage other stakeholders.
These activities were subsequently categorised under three phases of the receivership process, namely:
 Phase 1 - preservation of assets and validation of the financial positions;
 Phase 2 - Realization of the assets (including loan recoveries), administration of creditor claims
and payment of interim dividends as appropriate; and
 Phase 3 - Complete assets realizations, resolution of matters in litigation, payment of dividends
as appropriate, complete administrative and statutory duties.
13. As we speak today, total loans taken over by the Receivers amounted to Gh¢10.1 billion, while total
proceeds realized up to date are over Gh¢849 million. These proceeds were realized through loan
repayments by customers, placements repaid, proceeds from sale of vehicles, bonds, other income -
interest from placements made and the refund of commissions paid. As regulators, we are very grateful
for the support received but urge the investigating bodies and the judiciary, the Government, Chief
Justice and Security Agencies to work steadily to recover certain assets from shareholders, directors and
loan defaulters of the erstwhile defunct banks. Currently, there are fifty-two (52) cases in the various
courts in the country, 50 of which have been assigned to specific judges/courts. In addition, over sixty
(60) cases have been referred to the Special Investigative Team.
14. The task is enormous but we have confidence in our judicial system to bring those culpable to justice.
The Bank of Ghana will continue to work with the Receiver to ensure that bottlenecks in the receivership
process cleared for the orderly winding down of the defunct banks.
Internal Reforms
15. Unfortunately, our predecessors in line with the governance challenges in the country at the time allowed
the central bank operations intertwined with the political economy thereby committing considerable
resources into non-core functions of the bank including building 5-star guesthouses in Takoradi and
Tamale as well as the Bank Hospital in Cantonments. We have refocused the Bank around its core central
bank responsibilities, that is monetary policy and exchange rate management, price stability, financial
stability, banking sector regulations, and supervision. A number of our staff are going through internal
administrative process to establish culpability, if any, that contributed to the challenges resulting in the
clean-up of the financial sector. Once that process is completed, the public would be briefed of
administrative actions that have been taken. In fact, yesterday one staff was dismissed for gross
misconduct and conflict of interest involving the award of the Sibton Switch Contract which was cancelled
in August of 2017. The signal has been sent clearly to staff about the need to ensure discipline and
professionalism in line with the new Code of Conduct that was launched in May this year.
Capacity Building Efforts
16. Mr. Chairman, we will continue with our regulatory reforms and efforts at strengthening the internal
structures of the Bank of Ghana to prevent complicity of staff with third parties in the course of discharge
of their supervisory duties. The strengthening of our regulatory and supervisory capacity will happen
through improved systems, processes, accountability and training, all in a bid to better identify violations,
detect early warning signals, enforce the law, and ensure that banks take prompt corrective actions to
address emerging risks. Our crisis management framework is also being strengthened to help us contain,
manage, and resolve crises more promptly. We are bringing international best practices and standards to
create a central bank that is fit for purpose.
Proud of Collaboration
17. Ladies and Gentlemen, at the end of the clean-up exercise, I am confident to say that as a bank, we are
proud of the reforms and achievements so far. These have been possible as a result of support and
collaboration with key stakeholders, that is the banks and SDIs, strong support from the government, and
not the least the strong support from our international partners-the IMF, World Bank, and other
development partners.
Conclusion
18. Finally, Mr. Chairman, the Bank of Ghana will continue to pursue policies and programs aimed at
developing a vibrant financial system capable of harnessing financial resources for the growth and
development of our country. We appreciate the healthy working relationship existing between the Bank of
Ghana and the Ghana Association of Bankers and we believe that this co-operation should continue and
be deepened to enhance the performance of the banking sector.
Thank you for your attention.