…new reporting requirements start this week
The 34 universal banks currently still licensed by the Bank of Ghana to operate in the country are now scrambling to beginning with a comprehensive set of new regulations introduced by the central bank a couple of weeks ago, to improve the quality of corporate governance with which they are managed.
The first timeline for implementation of the new regulation falls due this week- this one regarding the regulation that the Boards of banks have been given a maximum of 12O days from the end of each financial year to provide certification to the BoG that corporate governance shortcomings identified during the previous financial year are being addressed, along with actual action plans and time tables for the actions being taken.
The new regulations were introduced in mid April in response to the realization by the BoG that corporate governance deficiencies are the main cause of the ongoing financial difficulties currently afflicting several banks in the country and which indeed led to two banks – the erstwhile UT Bank and Capital Bank – having their licenses revoked in August last year. Also another bank, Unibank, which is the largest privately owned indigenous bank was put into administration in March this year, to avert a similar fate.
Poor corporate governance, manifesting in the form of poor credit risk management has been identified by the regulator and by industry analysts alike as the primary cause of the technical insolvency that has afflicted these banks and is threatening several others as well. Governance problems have been seen to be particularly troubling among the indigenously owned banks and indeed all three that have been the subjects of extreme regulatory action by the BoG over the past eight months are all Ghanaian owned.
The second deadline will fall due by the end of the third quarter of this year; this is for each bank to furnish the BoG with in-house self evaluations of the performance of their respective Boards of Directors, during the first half of the year, with regards to ensuring compliance to anti money laundering and financing of terrorism regulations and the management of risks deriving from these issues. The evaluation for the second half of the year, must be given to the BoG latest by the end of the first quarter of the next year.
Between these two dated deadlines however, the banks will have their hands full implementing a vast array of new corporate governance regulations which combined will drastically change the management structures and frameworks of banks in Ghana. Indeed Gold Street Business has learnt that most banks have been engaged in a continuous stream of emergency meet5ings at both the board and the top management levels, over the past fortnight in an effort to work out ways to ensure compliance to the most profound governance structure changes the industry has ever been forced to contend with.
One of the most fundamental changes about to be enforced requires that no one person can be both board chairman and chief executive at the same time of a bank or financial group that engages in taking deposits. This effectively eliminates the position of Executive Chairman, such as is held currently by Edward Effah at the Fidelity Bank Group.
Another relates to the tenor of office of Board chairpersons, which is now restricted to a maximum of two terms of three years per term; and of chief executives, now limited to a maximum of three terms of three years each.
Instructively, some bank CEOs, such as Frank Adu Jnr of CAL Bank and Alhassan Andani of Stanbic Bank have already been CEOs of their respective banks for well over a decade.
New regulations such as these present the spectre of major shake ups in the management structures of several banks, at both the management and board levels and this will happen even as most banks are having to grapple with the daunting challenge of meeting the BoG’s new minimum capital directive of GHc4OO million by the end of this year.