The Bank of Ghana has implemented key reforms to stem the recurrence of the banking sector crisis that led to the collapse of 420 financial institutions in the country.
Speaking at the 2020 GIMPA Law School webinar Conference on the financial sector crisis, Governor of the Central Bank, Dr. Ernest Addison disclosed that the banking sector reforms are yielding positive results.
According to him, the sector has become better capitalized and resilient.
Dr. Ernest Addison emphasized that the revocation of licenses of the defunct banks was “necessary to clean the financial sector and reduce contagion risks while creating an environment for a stronger and well-run institution to thrive and play their expected intermediary role of supporting the economy”.
The central bank Governor also revealed that some collapsed financial institutions were set up by persons with little or no experience in banking and from questionable backgrounds.
He also hinted that the managers of the defunct banks exhibited a complete disregard for norms and best practices in corporate governance.
Dr. Ernest Addison disclosed that BoG has undertaken key reforms to address system failures that resulted in the banking sector crisis. Key among those reforms included the sharpening of the Central Bank’s monitoring, supervision and enforcement tools.
The BoG has also enhanced the regulatory regime, while boosting capacity and addressing the ethical culture of BOG’s supervisory departments.
Dr. Addison reiterated the BoG’s commitment to adopting policy measures aimed at restoring confidence and preserving financial stability.
He also hinted that the Central Bank has invested in a new state-of-the art surveillance software that will capture supervisory data from regulatory institutions more accurately.
The banking sector reforms resulted in the dissolution of four hundred and twenty (420) weak financial institutions. These included nine (9) banks, fifteen (15) savings and loan companies, eight (8) finance houses, and three hundred and forty-seven (347) microfinance institutions.
The Bank of Ghana also raised the minimum capital requirement for the banks to GHC 400 million by 31st December 2018. This was a key policy aimed at strengthening banks to become more resilient.