ghananlpcommunity/ghana-gov-speeches-sentences huggingface dataset:
Modules: ORASS supports the entire supervisory cycle in four modules, namely: • A Regulatory Reporting module by which supervised institutions upload completed prudential returns and submit them to the Bank of Ghana through APIs (machine- to-machine submission mode) or manual entries or file uploads on the portal for smaller institutions; • A Licensing & Regulatory Transactions module, which enables the Bank of Ghana to manage licensing processes, authorisations, and other regulatory actions, and integrates information from such processes with subsequent supervisory data; • A Risk-Based Supervision module which assigns overall risk scores and risk profiles for each regulated institution based on globally accepted risk -based supervision frameworks; and • An Analytics module, which in conjunction with business intelligence tools, generates interactive reports and dashboards from a Datawarehouse for authorized users.
I am happy to share that the project is now fully implemented after a few delays caused by pandemic-related travel restrictions that the vendors faced, and initial challenges with file uploads on the system.
Already, several benefits are evident: • It has ensured full integration of our supervisory cycle from licensing to resolution of regulated financial institutions; 4 • It has provided a single portal that consolidates prudential data from regulated institutions, streamlines reporting templates, eliminates or reduces data silos and blind spots , and provides a single decision support system and standardises information presentation through customized reports and dashboards to aid operational, analytical, managerial and policy decisions; • It does not only support our supervisory functions, but also helps to support our monetary policy operations, and our foreign exchange market surveillance; • It has enabled for the first time, the collection of large volumes of granular -level data (including on a sex -disaggregated basis, age and other demographics) for classification of products and services including deposit accounts and loan types, and on digital financial services (including internet banking and mobile money - based products like micro loans), fraud related data, ESG compliance reporting, and deposit-insurance related reporting .
This helps to better track access to and use of banking services and helps to design appropriate interventions to promote financial inclusion; • It has led to improved data integrity due to multiple in-built validation rules; and • It is a more dynamic system with flexibility to onboard future licensing of new entrants, updating of returns, generation of new returns and reports, and overall growing supervisory needs.
The above-named benefits notwithstanding, a few key lessons learned are worthy of mention.
For example: • Suptech p roject implementation timelines need to reflect the preparedness of regulated institutions to migrate to the new system.
While early and close consultation with the industry helps to anticipate implementation challenges, regulated institutions may overestimate their capacity to migrate to the new system, and this should be factored into timelines; • Implementation of granular -level data collection modules may be particularly challenging, given that baseline data may be lacking.
Successful and credible implementation of this module may require some intermediate steps to allow 5 regulated institutions to update their customer profiles before the system commences; • The implementation of the system has introduced increased cybersecurity risks that necessitate careful consideration and mitigation.
The design and implementation of ORASS coincided with the establishment by the Bank of Ghana of a Financial Industry Command Security Operations Centre (F ICSOC) aimed at enhancing cyber resilience across the entire industry; • System specifications must be appropriate for the level of sophistication of the financial system, while making room for future growth and development.
Due diligence is required to ascertain the capabilities and functionalities of systems in comparable jurisdictions or markets; • Acquisition costs could be prohibitive, and efficien cy gains could be achieved by sequencing the adoption of modules, using local expertise if available or exploring pairing vendors with staff of the supervisory authority to reduce costs and promote capacity building.
Costs implications for regulated financial institutions (particularly smaller ones) is also a key factor, particularly depending on the level of technological updates they are required to make for supervisory reporting and cyber security enhancements; • Capacity building and technology transfer arrangements are key to support the post-implementation system maintenance.
Bank of Ghana’s project implementation approach as agreed with the foreign vendor ensured maximum technology transfer and capacity building of Bank of Ghana technical staff through active participation in the build stage, in user acceptance tests and troubleshooting.
Additionally, the handholding and mentoring component of the project meant that the vendor actively built the capacity of Bank of Ghana’s project implementation team to ensure that they could provide effective local post - implementation support; and • Last but not least, Suptech, no matter how well designed and implemented, cannot replace good supervisory judgement.
This requires continued investments in 6 capacity building of supervisors to help ensure effective risk -based supervision , supported by appropriate Suptech.
Bank of Ghana’s experience demonstrates the benefits that Suptech can offer to promote effectiveness and efficiency in supervision to promote key objectives of financial stability, financial integrity, and financial inclusion.
Lessons learned also point to challenges on the journey, and how they were resolved in Ghana, 12.
I do hope that these lessons provide encourage ment and guidance for other supervisory authorities seeking to invest in Suptech solutions.
Clearly, there is scope for international peer learning and guidance in this area.
The Bank of Ghana has had the opportunity to share our ORASS project implementation experiences with a number of other supervisory authorities in Africa and beyond, and we look forward to continuing to engage in this regard to find common solutions that meet the needs of emerging markets and developing economies.
We also remain committed to building on our Suptech journey by continuing to build on ORASS in areas that will complement its effectiveness.
For example, our ongoing partnership with the Cambridge Suptech Lab is helping us develop a prototype consumer protection Suptech tool (with chatbox, and web and social media scraping capabilities) to interface with ORASS so that we get an integrated prudential and consumer protection view of our supervise d entities.
We deeply cherish and are grateful for this partnership.
In closing, I am confident that deliberations at this forum will help to advance a clear path forward for Sup tech solutions that help to make our financial systems more stable, resilient, and inclusive.
Thank you for your kind attention!
I wish you happy holidays and a Happy New Year in advance.
1 THE CHARTERED INSTITUTE OF BANKERS (GHANA) 2023 GOVERNOR’S DAY ADDRESS BY DR.
ERNEST ADDISON GOVERNOR, BANK OF GHANA 1ST DECEMBER 2023 UPSA AUDITORIUM, ACCRA 2 The First Deputy Governor of Bank of Ghana, Dr.
Maxwell Opoku-Afari The President of Chartered Institute of Bankers (CIB), Ghana, CEO of the CIB, Members of the Governing Council of CIB, President of the Ghana Association of Banks, Fellow Members of the Institute, Chief Executive Officers of Banks, Members of the Banking Fraternity, Distinguished Guests, Ladies and Gentlemen.
It is a great pleasure and honour to join you at this annual event which crowns the activities of the Institute for the year.
Let me thank the President and the Chief Executive Officer of the Chartered Institute of Bankers, and the Management team for the kind invitation to deliver the keynote speech.
But, before I start, let me say that as stakeholders of the financial sector and collectively as a country, we do have a lot to be thankful for as another challenging, but fulfilling year gradually draws to a close.
Distinguished Guests, the banking sector has progressed steadily amidst series of storms in the past six years.
We witnessed the banking clean -up exercise between 2017 and 2019, the COVID-19 pandemic in 2020, spillovers from geopolitical tensions in Europ e, and an economic crisis in 2022 that triggered a domestic debt exchange.
Despite all these, banks have remained relatively stable and sound, partly because the Bank of Ghana provided leadership to the industry to navigate through these economic uncertainties and volatilities with policy clarity and focus safeguarding stability of the financial system at all cost.
As noted by the former Bank of England Governor, Mervyn King, “Central bank governors require three key qualities; a deep commitment to price stability; an ability to be clear and direct to politicians about the policies that are required to produce economic stability; and 3 the ability to be unpopular when circumstances require ”.
To appreciate this quote, my speech today will recap where we started from in 2017, narrate the effects of recurring shocks on the economy and difficult policy actions taken to turn the situation around, and finally, provide an outlook for the economy.
DEVELOPMENTS BEFORE THE CRISIS PERIOD 4.
Distinguished Guests, Ladies and Gentlemen, Ghana’s macroeconomic fundamentals were firmly anchored by the end of 2019, following the implementation of sound macroeconomic policies, prudent economic management under an IMF Extended Credit Facility which Ghana completed in 2019 , as well as far reaching banking sector reforms from 2017 to 2019.
Inflation had edged down to 7.9 percent in December 2019, well within the medium-term target band of 8±2 percent and stayed in single digit for about 24 months, growth was strong, the exchange rate was relatively stable, the current account had improved significantly supported by three years of trade surplus, significant narrowing of current account deficit, and the associated strong reserve buildup.
The three-year banking sector reforms successfully ended in 2019 and included an increase in the minimum capital requirement for banks, revocation of licences of insolvent institutions, and an overhaul of the regulatory and supervisory frameworks.
At the end, the sector became better capitalized, liquid, profitable, more resilient with adequate capital buffers, and more operationally efficient .
Though the closure of the defunct banks was difficult and painful, the measures taken by the Bank of Ghana, supported by Government’s assumption of the payments due depositors, helped avert the total collapse of the banking sector and by extension the rest of the financial sector.
Although we note the sanity and resilience in the banking system after the clean -up exercise, the full benefits would be 4 achieved with a much faster completion of the legal proceedings including over 1,300 civil and 21 criminal cases currently pending at different stages in our courts.
THE CRISIS PERIOD AND THE POLICY ACTIONS 6.
Ladies and Gentlemen, with these strong economic fundamentals, a sound and stable financial sector, as well as relatively developed payment system architecture, the country had been placed on a path of transitioning to accelerated growth and development, even in the face of challenges that typically come with the political cycle.
Then came an unprecedented global shock in 202 0, which had a three -pronged impact on health, social life, and the economy.
I am sure the memories of the devastating effects of the pandemic and the global uncertainty it triggered are still fresh on our minds.
This notwithstanding, the strong response with clear public policy initiatives by the government helped manage the consequences of the pandemic effectively.
Of course, protecting lives and livelihoods at all costs required exceptional financing.
Fortunately, through the swift interventions of the international financial institutions, the IMF (through the Rapid Credit Facility) and the World Bank, a significant portion of this financing was met.
In addition, the Bank of Ghana had to fall back on its buffers and policy space to provide the needed additional support through the purchase of GHS10 billion of the Government’s Covid-19 bonds, which helped to close the exceptional financing gap.
These interventions from the Bank of Ghana, the IMF, and the World Bank, assisted the government to navigate and effectively contain the devastating effects of the pandemic.
Despite the additional support to government, the fiscal cost associated with containing the pandemic was large and exacerbated by the spillovers from the Russia -Ukraine war in 2022.
As a result, sovereign spreads on Ghana bonds widened, and Credit Rating Agencies further downgraded Ghana’s sovereign debt rating, which effectively blocked Ghana’s access to the international capital markets.
Thus, the planned external borrowing to the tune 5 of about US$3 billion was missed.
It is important to state that Ghana’s annual external debt service payments and energy payments alone was in the range of 3 to 4 billion US dollars annually as at 2020.
A significant part of the annual borrowing was therefore to manage debt liabilities, including energy related payment obligations.
Ladies and Gentlemen, the lack of access to the market for new financing immediately triggered a liquidity crisis, spilling over into a balance of payments crisis as the country had to continue to honour debt service obligations and energy payments.
In do ing so, within two (2) months, the Bank of Ghana lost about US$500 million in reserves, while overdraft facility for the government increased significantly.
Throughout the first half of the year 2022, there was no new foreign financing until July when the Afreximbank stepped in with US$750 million support.
It was under these circumstances, that the Government had to approach the IMF for support in July 2022.
The IMF immediately sent in a Mission to assess the economic situation.
That mission concluded that the economy was at the tipping point.
It was decided with, the understanding of the IMF, that the Bank of Ghana should continue to provide the necessary support to keep the economy running until a reform programme had been put into place to trigger IMF financing.
Ladies and Gentlemen, it is important to remind ourselves, as players in the global economy, that the crisis that hit the Ghanaian economy in 2022 was like what pertained in many other frontier and emerging market economies, including Egypt, Argentina, Turkey, Kenya, Sri Lanka, and Pakistan, just to mention a few.
These countries, except for Sri Lanka, had built policy buffers and resilience of their key institutions provided the needed anchor to hold their economies until reform packages were introduced.
In the case of Ghana, the strong policy buffers built over time, allowed the bank to step in to support the 6 economy until the IMF program me was concluded, because of the policy buffers built, following years of prudent management.
The Bank played a critical role to support the economy during the crisis period with distinction.
It is very clear the bank’s role in supporting the economy through this crisis has not been fully understood and in some cases deliberately misinterpreted.
T he Bank came under severe attack across the media space, culminating in an organised demonstration against the institution.
Ladies and Gentlemen, central banks all over the world have had to re -evaluate their mandate since the global financial crisis of 2007/2008 and have supported fiscal policy to play a countercyclical role in stabilizing economies.
Consequently, central banking has never been the same.
Before the financial crisis, the quintessential task of central banks was straightforward, keeping inflation within a tight range through the control of short -term interest rates.
In a world of polycrisis, central banks have fo und themselves broadening monetary policy formulation beyond interest rate s to include the deployment of balance sheets in a variety of unconventional monetary policies.
Th us, the crisis exposed a chasm between theory and practice.
Indeed, all that Bank of Ghana did as various shocks hit the economy was consistent with prudent crisis management.
In 2020 pandemic, the Central Bank supported the financing of the budget to protect lives and livelihoods.
Again, in the 2022 economic and liquidity crisis, the Central Bank would not have acted differently but played its role as an automatic stabilizer to avoid pushing the economy to a tipping point which possibly could have spilled into social upheavals as was the case in Sri Lanka.
It is very clear that only a Central Bank that has been prudently ran , built buffers, and well positioned , that can step in to support an economy from collapse.
It is therefore most appropriate, I believe, to state that Ghanaians should rather applaud and commend the resilience of the Bank of Ghana.
7 The IMF Programme and Corrective Measures 13.
Indeed, the crisis ended up with an IMF bailout programme which was approved in May 2023.
The corrective policies included stringent fiscal and monetary policies to help restore macroeconomic stability and debt sustainability, while laying the foundation f or inclusive growth.
It emerged from the discussions that ensued that macroeconomic adjustments alone would not be enough to deal with the problem of debt sustainability, as the debt sustainability analysis confirmed that Ghana’s debt would still not be sustainable even after the expected macroeconomic adjustments and therefore some form of debt treatment was needed to support the entire programme.
The structure of Ghana’s debt was such that both domestic and external debt treatments were required due to their almost equal proportions in the total debt.
The Debt Exchange (DDE) program, where the stock of Government of Ghana debt was to be halved from 105 percent of GDP (including contingent liabilities) to 55 percent of GDP by 2028 was launched, starting off with the Domestic Debt Exchange.
Distinguished Guests, implementation of the DDEP was not an easy task as it was the first time that a country in Africa had to undergo a debt restructuring programme, which not only covered external creditors, but also domestic creditors.
Broadly, s overeign debt workouts are painful, for the debtor country, its citizens, its creditors, and official creditors.
It must be executed very carefully for the economy to return to normal economic activity quickly.
Under circumstances where access to credit markets remains unavailable, and trade finance is hampered, foreign direct investment is withered, and financial instability remains, the longer it will take the economy to recover.
The initial debt restructuring scenarios had to be tweaked several times between the initial announcement and the final scenarios.
On the domestic side, households, institutions, pension funds and the Banks, somewhat saw less punitive treatment than initially designed.
8 Given that the debt threshold remained unchanged, the Bank of Ghana had to therefore step in as the “loss absorber” with a more punitive treatment (50% haircut) than initially designed, leading to a large loss at the Bank of Ghana, driving it into negative equity at the end of 2022.
This is not to justify the losses, but to indicate that the policy choices made by the Bank during those difficult times were for the greater good of the economy.
The Bank has commenced corrective actions to deal with the aftereffects of the losses and remains committed to the highest standards of sound management, transparent accounting, and good governance practises.
THE EMERGING RECOVERY 16.
Ladies and Gentlemen, the policy mix under the IMF --supported PC -PEG programme characterised by stringent fiscal and monetary policies to ease off aggregate demand pressures and contain the rising inflation is gradually yielding positive results.
The cumulative increases in the policy rate by 1,550 basis points since January 2022, supported by the relative exchange rate stability have supported the disinflation process.
From the peak of 54.1 percent in December 2022, headline inflation has declined to 35.2 percent in October 2023.
Non-food inflation has also declined sharply by more than 20 percent during the period, broadly aligned with the monetary policy stance.
In addition, underlying inflation pressures are easing, evidenced by the downward trend in al l the core inflation measures.
Ultimately, the goal is to gradually re-anchor inflation back within the medium- term target of 8±2 percent.
Furthermore, the country’s external sector position has improved in the first three quarters of the year with a lower overall balance of payments deficit outturn.
This was on the back of a current account surplus, reflecting higher gold export receipts and import compression, 9 as well as lower outflows from the income accounts due to the external debt standstill.
The lower balance of payments deficit, the domestic gold purchase programme, inflows from the mining and oil sectors, as well as the liquidation of some short-term external liabilities have contributed to increased reserve buffers and provided some stability in the foreign exchange market.
Despite the tight policy framework, growth conditions are gradually improving.
In the first half of 2023, GDP growth averaged 3.2 percent.
Also, high frequency economic indicators monitored by the Bank have continued to improve, signalling the likelihood o f outperforming the GDP growth projection of 1.5 percent for the year.
These developments provide evidence that the policy mix under the IMF Extended Credit Facility is beginning to yield results.
Now to the banking sector , Ladies and Gentlemen, recapitalisation by banks in 2018/19 and the clean -up process from 2017 -2019 were meant to position the banking sector to withstand shocks such as what emerged in 2020 and 2022.
The 2022 audited Financial Statements of banks, following the Domestic Debt Exchange Programme (DDEP), pointed to significant impairments in capital levels of banks.
This impact was largely attributable to the significant percentage holdings of assets in GoG bonds.
Thus, the mark -to-market valuation losses following the DDEP, coupled with higher impairments on loans and rising operating costs, resulted in significant losses in 2022.
The main profitability indicators, namely, return-on-assets and return-on-equity all turned negative because of the industry’s loss position.
It is however important to note that the banking industry would have been in a far worse situation with this kind of shock had the earlier reforms not occurred.
To moderate the potential impact and help safeguard financial stability, the Central Bank gave temporary regulatory reliefs for banks and SDIs who participated in the DDEP.
While 10 these reliefs were intended to cushion banks and SDIs from the impacts of the DDEP, the Bank of Ghana expected them to fully restore capital gaps caused by the DDEP proportionally over the next three years, ending 31st December 2025 in line with capital restoration plans approved by the Bank of Ghana.
The Government of Ghana has also published the operational framework for eligible banks to access recapitalisation support from the Ghana Financial Stability Fund.
Despite the significant DDEP-related losses in 2022, prudential data in the year to October 2023, show relative stability in the banking sector.
Total assets have increased by 16.7 percent year -on-year to GH¢257.89 billion funded by deposits, which recorded 26.6 percent growth to GH¢199.94 billion from GH¢172.09 billion.
Total borrowings by banks, however, contracted by 21.0 percent to GH¢14.94 billion from GH¢30.41 billion a year earlier.
Profitability of banks has remained relatively strong, on the back of higher interest income on loans and investments as well as other income sources.
These developments culminated in an industry profit -after-tax of GH¢7.10 billion, representing a 60.4 per cent annual growth, compared with 17.2 percent growth in 2022.