Banking
From The Report: Ghana 2020
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A regulatory crackdown on poor business practices and weak capital positions in Ghana’s banking sector has resulted in a series of market exits since August 2017. The outcome is a smaller but more sustainable banking industry, though this has come at a price. The Bank of Ghana puts the total cost of its clean-up operation at GHS10.98bn ($2.1bn), equivalent to over 3% of the nation’s GDP in 2019. The central bank’s reform effort means that Ghana’s banks will have greater capacity to respond to rising demand from the private sector, thanks to larger capital bases and improved corporate governance structures. Demand for credit is likely to be driven by growing sectors such as manufacturing and mining, as well as the government’s need for debt financing to cover its fiscal deficit. This chapter also contains interviews with Ernest Addison, Governor, Bank of Ghana; and Julian Opuni, Managing Director, Fidelity Bank.

Articles from this Chapter

Overview

Restoring confidence: A sector clean-up led by regulators has resulted in a smaller but more sustainable industry
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A regulatory crackdown on poor business practices and weak capital positions in Ghana’s banking sector has resulted in a series of market exits since August 2017. The outcome is a smaller but more sustainable banking industry, though this has come at a price. The Bank of Ghana (BoG) puts the total costs of its clean-up operation at some GHS10.98bn ($2.1bn), equivalent to just over 3% of the nation’s GDP in 2019. Reforms An asset quality review carried out by the BoG in 2015 and 2016…

Analysis

Macro impact: The microfinance segment remains crucial for rural and underserved populations
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Ghana was an early adopter of the microfinance concept. According to the regulator, the Bank of Ghana (BoG), the first credit union was established in northern Ghana as early as 1955, introduced to the country by Canadian missionaries. A more local financing tradition, susu (where informal agents charge a small fee to hold money and provide limited credit), is thought to have spread from Nigeria to Ghana in the early 20th century. From there, the microfinance industry advanced in a number…

Interview

Upwards and onwards: Ernest Addison, Governor, Bank of Ghana, on the impact of recapitalisation on the health of the financial sector
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Interview:Ernest Addison How have higher capital requirements helped to stabilise the banking system? ERNEST ADDISON: The higher capitalisation requirements are part of a holistic reform to address vulnerabilities in the banking sector. An asset quality review of banks undertaken by the Bank of Ghana in 2015-16 revealed severe challenges in solvency, liquidity and asset quality, alongside substantial under-provisioning and capital shortfalls in some banks. The increase in capital requirements…

Interview

Outside the box: Julian Opuni, Managing Director, Fidelity Bank, on the impact of reforms and the strength of indigenous banks
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Interview:Julian Opuni What impact did the recent reforms have on the performance of Ghana’s banking sector? JULIAN OPUNI: The banking sector is in a much healthier place due to the regulatory reforms implemented by the Bank of Ghana (BoG) – namely, the increase in capital requirements and the introduction of new corporate governance directives. However, in order to adequately assess the impact of these reforms, it is helpful to understand them as two distinct, yet related, sets of measures:…

Overview

A swing in the balance: Following a retrenchment of overseas operations by numerous major banks, how are firms in emerging markets responding?
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The three decades before the 2007-08 global financial crisis were marked by the world’s financial networks being increasingly interconnected. Financial system regulatory convergence, growing penetration of World Trade Organisation rules and the creation of currency unions, such as the euro, resulted in a surge in cross-border capital flows. Global banks began to see the emergence of a single global marketplace, and the potential this held for revenue and asset growth. In 1998 co-chairman of the freshly formed Citigroup, Sandford Weill, announced the dawn of a new age of banking in which large institutions would act as financial supermarkets…

Overview

A swing in the balance: Following a retrenchment of overseas operations by numerous major banks, how are firms in emerging markets responding?
OBG
plus

The three decades before the 2007-08 global financial crisis were marked by the world’s financial networks being increasingly interconnected. Financial system regulatory convergence, growing penetration of World Trade Organisation rules and the creation of currency unions, such as the euro, resulted in a surge in cross-border capital flows. Global banks began to see the emergence of a single global marketplace, and the potential this held for revenue and asset growth. In 1998 co-chairman of the freshly formed Citigroup, Sandford Weill, announced the dawn of a new age of banking in which large institutions would act as financial supermarkets…