Keynote Address by the Governor at the Gab 14th Annual Working Luncheon on July 16, 2014

8/19/2019 Keynote Address by the Governor at the Gab 14th Annual Working Luncheon on July 16, 2014

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KEYNOTE ADDRESS DELIVERED BY DR. H. A KOFI

WAMPAH, GOVERNOR, BANK OF GHANA AT THE

FOURTEENTH ANNUAL WORKING LUNCHEON OF THE

GHANA ASSOCIATION OF BANKERS ON WEDNESDAY,

JULY 16, 2014 AT LA PALM ROYAL BEACH HOTEL,

ACCRA.

Mr. Chairman,

Council Members,

Distinguished Guests,

Members of the Press,

Ladies and Gentlemen:

1. It is a pleasure to be back here at this year’s working

luncheon of the Ghana Association of Bankers and

stakeholders of the banking industry. I applaud the Association for encouraging collaboration among industry

players for the past thirteen years and also like to

commend Council Members for your unflinching

dedication to work and your strong will and resolve to pull


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your establishments through in the face of current

macroeconomic challenges.

2. Mr. Chairman, in this speech, I will present some

macroeconomic highlights and discuss the Bank’s vision

for the banking industry, highlighting opportunities and

challenges.

Macro-economic Developments

3. Mr. Chairman, recent macro-economic data by the Ghana

Statistical Service estimated the real GDP growth in the

first quarter of 2014 at 6.7 percent compared with 9

percent in same period last year.

4. Year-on-year Inflation reached 15.0 percent in June 2014

from 13.5 percent in December 2013. The upward

trajectory of inflation mostly reflects the pass-through ofadjustments in domestic petroleum prices, increased utility

tariffs and transportation costs, and cedi depreciation.

5. Pressures on the local currency still persist although there

is some moderation in the pace of depreciation on a

month-on-month basis. The pressures are major concern

due to the adverse sequences of the depreciating currency

on the economy. We, however, anticipate that the

proceeds from the cocoa syndicated loan and from the

Eurobond issuance estimated at almost US$3bn would


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provide significant support for the market in the second

half of the year. The onset of gas production in the fourth

quarter of the year would also reduce oil imports going

forward.

6. Mr. Chairman, the Monetary Policy Rate was raised by

100 basis points to 19 percent at the recent MPC meeting

was meant to anchor inflation and inflationary

expectations and to engender macro-economic stability in

the in the near term.

Highlights on Banking Sector developments

Ladies and Gentlemen, now let me present some banking

sector developments.

7. At end-May 2014, the banking and non-bank financial

institutions industry was made up of 1,051 institutionscomprising 27 class 1 banks, 57 non-bank financial

institutions (NBFIs), 139 rural/community banks, 435

licensed microfinance institutions, 388 forex bureaux, 3

credit reference bureaux and 2 representative offices of

foreign banks. The total number of bank branches as at

end-May 2014 was 892 and the average population per

branch, 28,027.

8. Despite such vast expansion of banking network and the

multiplicity of intermediaries, bank penetration still


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remains relatively low. In terms of geographical spread,

banking operations are urban-based and highly

concentrated in the southern part of the country with

unbanked population ratio of over 80 percent. This means

that our effort to reach the unbanked populace,

nonetheless, still remain a large untapped area for banks

to raise cheaper funds, through deposit mobilization.

9. In this regard, Mr. Chairman, permit me to enumerate

some of the key areas I envisage should engage the

attention of banks seeking opportunities for growth:

i. Retail banking. Despite some challenges facing the

economy, in my estimation, the growing middle class

offers a greater opportunity for a wide range of banking

menus to boost services delivery to the retail banking

sector.

ii. Syndication. The booming oil sector has created a huge

financing lacuna, which I will encourage banks to

collaborate through syndication to provide such

financing gap.

iii. Mobile banking opportunities are gradually coming

of age. With access to internet on mobile handsets,

banks can collaborate with the Telecos and to benefit

from the high mobile density in the country and roll out


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their products and services in order to reduce traffic

volumes at the banking halls.

iv. The SME sector represent another important area for

profitability and growth and I am expecting banks to

revise and develop new banking solutions and models

to serve this market segment to engender financial

inclusion among the less privileged communities.

v. The current depreciation of the cedi, while inimical to

import-driven businesses and on the flip-side supports

export-oriented companies which in my opinion lends

itself to profitable funding opportunities for banks to

foster economic growth.

On-going Reforms in the banking industry

10. Against these opportunities and the growingchallenges in the macro-economy, the Bank of Ghana has

initiated a number of key steps in line with its forward

looking view of the industry, which with your permission,

Mr. Chairman, I would like to highlight a few:

11. After completing the December 2012 deadline for

compliance with the GH¢60.0 million regulatory capital for

banks, the Bank of Ghana in 2013 further revised upward

the capital requirements for new entrants, while

encouraging existing institutions to beef up their capital


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position in this regard. Minimum paid-up capital for banks

has been revised to GH¢120.0 million.

12. Similarly, the capital requirements for Non-Bank

Financial Institutions now stands at GH¢15.0 million, up

from GH¢7.0 million while the minimum capital for rural

banks has been pegged at GHȼ300 thousand.

13. The microfinance sector investors now require

GH¢500 thousand and GH¢300 thousand to obtain a Tier

II and Tier III microfinance company licence respectively.

However, in the very near future, the capital requirement

of banks would be assessed on the strength of their

Internal Capital Adequacy Assessment Process.

14. Council Members, the mention of that the

emerging microfinance sector and its ensuing challenges,

coupled with the general developments in the Ghanaian

banking and the NBFI sectors have warranted the

management of the Bank of Ghana to realign the

supervision functions to meet the risk and challenges in

the industry. A new department has been created to

serve the supervisory needs of Rural and Community

Banks, Microfinance institutions and Forex bureaux.


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Bank and SDI and the Deposit Protection Bills

15. Another important emerging landmark worth

mentioning relates to the revision of the Banking Act,

2004 (Act 673) as amended by the Banking Amendment

Act 2007 (Act 738) and the development of a Deposit

Protection Bill. Inherent vulnerabilities and risks, coupled

with the learnt lessons of the global financial crisis calls for

a re-thinking of the legal and regulatory regime of our

industry. As I speak with you, a draft proposal of the Bank

and Specialised Deposit-Taking Institutions Bill has been

prepared and is undergoing review. The new bill attempts

to incorporate some of the missing links in the current Act

including, but not limited to, Consolidated Supervision,

reinforcement on Exposures of Connected Nature, Prompt

Corrective Actions, Islamic Banking, and detailed

Resolution Framework.

16. Mr. Chairman, the fallout from the global financial

crisis has aroused interest in the protection of consumers

of financial services. The Bank of Ghana is introducing a

Deposit Protection Scheme to consolidate its mission of

promoting confidence in the financial system especially in

relation to protecting the savings of all depositors, while

encouraging financial inclusion and access to formal


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financial services. To fulfill this mandate, a draft Deposit

Protection Bill has subsequently been finalized for onward

submission to Parliament for passage into law.

Onsite Examination

17. It is worthy to note, Council Members, that the

overall outcome of the 2013, on-site visit to supervised

institutions was satisfactory and positive, showing general

improvements in financial positions and performance as

well as in their risk management framework. In spite of

these feats chalked, I must stress that we should not take

our eyes off the ball. Our vigilance has paid off, but we

must not be complacent. Let us continue to keep up the

good work, repeating with more dedication and resolve

what drove us there, and revising our models foreffectiveness in areas of weakness.

18. Going forward the Bank of Ghana will continue its

efforts at improving the legal framework and regulatory

oversight activities in a bid to strengthen the safety,

stability and soundness of the financial system in Ghana.

The Bank of Ghana will continue its collaboration with

examiners from the Central Bank of Nigeria (CBN) to

conduct joint examination on Ghanaian incorporated

banks with Nigerian parentage under the framework of


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the College of Supervisors of the West African Monetary

Zone.

Banking Regulations

19. The Bank of Ghana continues to strengthen its

supervisory role and deepen its Risk-based approach to

supervision by developing directives, guidelines and

regulations for the industry. A number of guidelines and

regulations relating to corporate governance, loan write-

off, outsourcing, mergers and acquisition, risk

management and establishment of representative offices

are at advanced stages of discussion awaiting final

approval and issuance.

Conclusion

20. For my concluding thought at today’s lunch session,

Mr. Chairman, I ask the following five (5) fundamental

rhetorical questions which I know are not new to us.

i. How can we all as a collective unit in the banking industry

fund our middle-income country which is currently facing

some short-term challenges?ii. How will banks enlarge outreach in terms of customer

base and product choices, and employ technology enabled

payment systems in an efficient, accessible and assured

manner?


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iii. What modalities do we have in place to attract and retain

skilled manpower and leverage them for business growth

and risk mitigation in a responsible and responsive

manner?

iv. How will banks be able to mobilise the required amount of

capital to meet current and future transaction needs and

regulatory requirements? and;

v. How do we survive in a crisis situation?

Mr. Chairman, I am happy that the solutions and/or answers

to these pertinent questions are usually found in forums like

this and I am positive the banking industry in Ghana is capable

of converting the current challenges into potential opportunities

and would be better placed to serve efficiently, the real

economy. The Bank of Ghana, on its part, will continue to

create the enabling regulatory environment that can act as

catalyst in this process.

I wish you well in your deliberations.

Thank you and God bless us all.

Documents

Keynote Address by the Governor at the Gab 14th Annual Working Luncheon on July 16, 2014