million to gh¢60 million in two years is expected to remain a major challenge. to achieve the next stage of capitalization therefore, domestic banks have to seriously consider their options and consolidate their positions through mergers or open up for acquisitions. these will be necessary to enhance their competitiveness and thereby improve their ability to participate in high value transactions. mr chairman, most of our banks rely on ict platforms for the delivery of financial services. 32. following the global financial crisis, risk management has taken centre stage in bank regulation and supervision. different kinds of risk have been identified ; market, credit, operational and reputational risks. operational risk has assumed great significance, due largely to the reliance on information and communication technolgy, or ict, platforms for the delivery of financial services. 33. the rapid pace of ict usage in the banking sector requires continuous knowledge update by both operators and regulators. indeed, regulators will have to acquire special expertise in it auditing to ensure appropriate monitoring of ict - related vulnerabilities in the banking sector. the bank of ghana will also insist that stakeholders in the industry improve corporate governance systems, especially the installation of an effective internal control system. mr chairman, broadening financial sector regulation 34. one of the critical lessons that emerged from the global financial crisis is the need to tighten financial regulation. this was underscored by the inherent risks of diversifying into non - bank financial businesses. the argument for additional regulation has centred on the risk exposures and speculative activities as banks broadened their horizon to include noncore banking activities such as insurance and capital market activities financed with depositors ’ funds. in the global financial markets, these trends widened the boundaries of regulation beyond the banking sector and without effective oversight from other financial regulatory bodies, gave rise to what is now termed “ shadow banking ”. 35. as part of restructuring the global architecture therefore, steps are being taken in a number of countries to limit banks from actively engaging in proprietary trading that was not instigated by clients, referred to as the volcker rule. 36. as the financial sector continues to grow in ghana licensed universal banks have started to branch into areas such as providing bancassurance services or setting up subsidiaries to engage in capital market activities. there is need for effective collaboration between financial sector regulators ; that is the bank of ghana, the national insurance commission and the securities and exchange commission and the national pensions regulatory commission. this approach of cross - sector supervision or consolidated supervision is necessary to ensure that emerging

kwesi bekoe amissah - arthur : challenges to the ghanaian economy address by mr kwesi bekoe amissah - arthur, governor of the bank of ghana, at the annual dinner of the chartered institute of bankers, accra, 27 november 2010. * * * mr. chairman, president of the chartered institute of bankers, fellows and members of the institute, distinguished guests, ladies and gentlemen 1. thank you for inviting me to dinner again. i am, of course, delighted to be here and to share with you, members of the chartered institute of bankers, my views on topical issues on the economy generally and the particular challenges confronting the financial and banking sector. 2. forgive me if i exceed the mandate of the central bank has been assigned, but the banking sector operates within the economy and is very sensitive to developments in it. therefore it is appropriate to review some important developments in the economy and how they impact on the banking system. 3. last year, i spoke on the challenges, lessons and opportunities for the banking system and the ghanaian economy posed by the global financial crisis. i enumerated a number of challenges and systemic risks that confronted the economy and the banking system and the need to introduce measures to mitigate the impact on our economy of what were essentially external shocks. 4. having put in measures to halt the decline, the economy has witnessed an appreciable level of macroeconomic stability, reflected in stable prices, stable exchange rates and increasing foreign reserves. however a number of new challenges confront us. in the mean time, the ghana statistical service ( gss ) has undertaken a rebasing of the national accounts and many people still wonder how to interpret the results and what the implications are. 5. the fundamental dilemma of policy is how to strike a proper balance in sharing the costs of the fiscal consolidation process? how do we assure the sustainability of the gains we have made in achieving macroeconomic stability? how best do we manage the expected revenue from petroleum exports and avert the worst manifestations of the resource curse. 6. my address tonight will therefore attempt to examine the challenges confronting the ghanaian economy ; the state of the banking system and our future concerns about its progress. mr chairman, let me start with the state of the economy : 7. it really does not need repeating that at the beginning of 2009 the ghanaian economy was confronted with macroeconomic imbalances that contributed to high fiscal deficits, high inflation, high interest rates,