the us financial crises, which occurred about a decade ago. 15. in our own history, the banking sector has witnessed its fair share of corporate scandals and bank failures. looking back to the 1980s, the ghanaian economy experienced one of its worst performances which spilled over to the banking sector. signs of financial distress emerged as public confidence in the financial sector waned, aggravated by a demonetization programme, and negative real interest rates on bank deposits. the loan books of banks became severely impaired and eroding the capital base of the affected banks. 16. over time, the economic difficulties coupled with poor corporate governance structures resulted in the eventual collapse of four banks and restructuring of others. these failures prompted the need for extensive policy measures and reforms to strengthen the legal and regulatory 7 | page frameworks. several laws were enacted to enhance business practices and risk management systems in the banking industry. as time progressed, other pieces of legislature were enacted in response to the changing dynamics and in line with international standards. 17. ladies and gentlemen, in recounting this history, i am seeking to draw attention to the adage that ‘ history repeats itself ’. despite the improved regulatory environment and supervisory frameworks, we have witnessed the resolution of two banks this year. while no systemic challenges to the financial sector arose from the resolution, it is useful to understand the underlying factors and reposition the sector to avoid the same mistakes in the years ahead. 18. let me be upfront and say that though the failure of the two banks was due to significant capital deficiencies, the underlying reason was poor corporate governance practices within these institutions. in this instance, we saw the dominant role of shareholders who exerted undue influence on management of the banks, leading to poor lending practices. this was also reinforced by weak risk management systems and poor oversight responsibility by the boards of directors. some of the examples of recklessness that led to the failure of the two banks include : 8 | page co - mingling of the banks ’ activities with their related holding companies. for instance, one bank was paying royalties for the brand name, even at the a that the bank ’ s financial performance was abysmal and could not pay dividends. interestingly, the royalties were approved by four ( 4 ) out of seven ( 7 ) members of the board without the consent of the other significant minority shareholders including an international financial institution. as a result, the international institution placed a notice on its website abrogating all relationships with the bank

gh¢300, 000. 14. these increases are necessary in order to provide our institutions with the muscle to undertake big - ticket deals to support the growth of the private sector and to further serve as a capital cushion for absorbing unexpected losses that may arise in the normal course of business. in this regard, i would like to take this opportunity to advise the industry players, particularly the banks, to properly align their risk appetite to their capital levels. this is important because any misalignment between risk and capital could threaten the solvency of the institution and unduly put shareholders investments at risk. mr. chairman, subsequent to bis central bankers ’ speeches these capital enhancements, we have initiated action towards gazetting the increases as required by law. 15. mr. chairman, to equip our tool box with the necessary tools needed to identify and manage problem banks, the bank of ghana has developed a supervisory intervention guide which seeks to provide a consistent and transparent framework for intervening in the operations of regulated deposit - taking financial institutions with the view to protecting the interest of depositors and shareholders. 16. in order to further strengthen the regulatory and supervisory regime, we have also developed guidelines and regulations which are being fine - tuned for the consideration of the sector minister and parliamentary approval where necessary. these include ; • corporate governance regulations • licensing regulations • outsourcing guidelines • risk management guidelines • external auditors regulations • mergers and acquisition guidelines 17. of these, the outsourcing guidelines and the corporate governance regulations have already been exposed to industry and we have received contributions and some interesting comments from the banks. it is evident that without a strong corporate governance regime, shareholder ’ s investments will be put at risks and the industry as a whole would be less attractive to investors. 18. mr. chairman, to further strengthen our supervisory function, the bank of ghana has also initiated action toward the revision and consolidation of the existing laws that govern the banking and non - bank financial institutions. it is envisaged that these initiatives would remove any potential vulnerabilities in the banking landscape to ensure a safe and sound banking practices across the industry. 19. another recent industry development is bog ’ s quest to introduce a deposit insurance scheme in ghana. pursuant to this objective, a feasibility study has been done by global business solutions of germany, financed by kfw of germany. the study has since been approved by the bank of ghana, kfw and the government of ghana ( gog ) through