The recapitalization of Ghana’s universal banking industry is now in its very last stages. Two of the three mergers and acquisitions sanctioned by the Bank of Ghana as the industry regulator have been completed and the last one is about to be fully consummated too. Already, the recapitalization of the other genres of financial intermediation companies are well underway as well and as the BoG completes that of the banking industry it can now turn its attention to that of those other genres.
Unsurprisingly, the other regulatory institutions ibn Ghana’s financial services industry are following suit in this regard. The National Insurance Commission has recently announced a new minimum capital level that will be applicable to both life and non-life insurers, the proposed increase almost precisely matching that imposed by the BoG on the universal banking industry. New minimum capital levels have been proposed by the NIC for both insurance brokerages and reinsurers as well.
In similar vein both the National Pensions Regulatory Authority and the Securities and Exchange Commission are following suit, having already announced to the companies under their respective regulatory purviews that recapitalization is on the cards imminently.
We agree with the stance taken by all of these regulators, the cedi’s depreciation, the expanding vista of operational activities and consequent risks incurred, the increasing globalization of the markets they operate in and the sheer expansion of their respective markets, have combined to make major recapitalization imperative.
However, we also wish to point out that recapitalization must be accompanied by corporate governance and risk management directives that will ensure better quality management of the enterprises themselves and their customers monies placed with them as part of the financial services they offer to those customers.
The BoG has done this with the banking sector and this holds the promise of ensuring that the problems that the banks created for themselves are never repeated again. With the other types of financial services providers, their shortcomings in this regard are not so easily uncovered because their obligations to their customers tend to be more long term than those of the banks. For instance, both life insurance and pensions contracts last for decades not months as is the case with most bank deposits.
But those shortcomings may be no less important. Indeed, since they are longer tenured than those of the banks, there is the distinct possibility that they are being left to fester much longer and so when uncovered, they will be all the more problematic.
Therefore, the introduction of and strict compliance with corporate governance and risk management practices is of utmost importance and thus must be implemented immediately, accompanying recapitalization right from the start.
Anything short of this simply would amount to postponing the evil day and providing a bigger platform for the ultimate troubles ahead.