The Structure Of The Ghanaian Financial System Finance Essay

The Ghanaian fiscal system is good structured and composed of 27 Banks, 50 Non-Bank Financial Institutions and 126 community and rural Banks under the Apex banking system. The Bank of Ghana which is the cardinal Bank in Ghana has categorized Bankss based on a accredited system ( Annual study, 2007 ) :

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· Class I Banking Licence-Universal banking

· Class II license- Universal and off-shore banking

· General Banking- both Universal and Universal and off-shore banking and ARB Apex Bank

The NBFIs is made up of Discount Houses, Renting Companies, Finance Companies, Mortgage Finance Companies and nest eggs and Loans Companies. The Bank of Ghana which is a cardinal Bank provides regulative and supervisory maps over all these NBFI ‘s.

The survey is limited to 27 Banks in Ghana and how the capital construction impacts on their profitableness. The Bankss were chosen because they are major subscribers to the Ghanese economic system since they account for approximately 70 % of fiscal establishments ( Bawumia 2008 ) .

The caput office of all the Bankss is located in the national capital ( Accra ) with their subdivisions sited across the state. The ownership or stockholders of the Bankss is composed of Ghanaians investors, foreign investors, the Ghana authorities or a combination.

Table 3.0 presents the figure of Bankss and subdivision webs, ownership and activity countries. Ghana Commercial Bank ( GCB ) and Barclays Bank, Ghana ( BBG ) has most subdivisions with the new Bankss yet to spread out to major metropoliss and towns. The Apex Bank Limited is a digest of 126 rural and community Bankss under one umbrella. Of the entire figure of Bankss, merely 13 are entirely Ghanese owned. Interestingly in the Banking industry in Ghana today, all the Bankss hold a Universal Banking License.

Table 3.0: Banks in Ghana

Name of Bank

Number of Branches

Ownership

Current Banking License

Barclays Bank of Ghana Ltd

120

Non- Ghanese

Universal

Merchant Bank ( Ghana ) Ltd

16

Ghanese

Universal

Ecobank Ghana Limited

32

Non- Ghanese

Universal

Ghana Commercial Bank Ltd

143

Ghanese

Universal

National Investment Bank Ltd

24

Ghanese

Universal

Standard Chartered Bank Ghana Ltd

19

Non- Ghanese

Universal

SG-SSB Bank Limited

36

Non- Ghanese

Universal

The Trust Bank Limited

17

Ghanese

Universal

Agricultural Development Bank Ltd

50

Ghanese

Universal

Bank of Africa

10

Non- Ghanese

Universal

Prudential Bank Limited

10

Ghanese

Universal

Fidelity Bank Limited

6

Ghanese

Universal

Zenith Bank Limited

9

Non- Ghanese

Universal

Stanbic Bank ( Ghana ) Limited

10

Non- Ghanese

Universal

Unibank Ghana Limited

11

Ghanese

Universal

Access Bank

20

Non- Ghanese

Universal

HFC Bank Ghana Limited

11

Ghanese

Universal

First Atlantic Merchant Bank Ltd

4

Ghanese

Universal

International Commercial Bank Ltd

12

Ghanese

Universal

Guaranty Trust Bank Limited

5

Non- Ghanese

Universal

CAL Bank Limited

10

Ghanese

Universal

United Bank for Africa ( Gh ) Ltd

16

Non- Ghanese

Universal

Bank of Baroda Ghana Ltd

1

Non- Ghanese

Universal

BSIC

1

Non- Ghanese

Universal

BPI Bank Limited

9

Non- Ghanese

Universal

Energy Bank Limited

4

Non-Ghanaian

Universal

Apex Bank Limited

126

Ghanese

Rural Banks

3.6.2 Development of Banking in Ghana

This subdivision discusses the post-independence banking system and unfolding issues and events. The duality between ownership and control during the pre-reform epoch and a liberalized competitory banking that characterized the post-reform banking sector will be the most of import focal point of treatment in this subdivision.

·The Pre- Reform Financial Sector

The Ghanese economic system concentrated largely on commercial banking in the post-independence epoch which was frequently led by state-owned Bankss chiefly to leverage the developmental aspirations of the Ghana authorities by doing available financess for sections, ministries, prioritized sectors and state-owned endeavors ( SOEs ) . During this period, Bankss were non positioned to run on competitory lines but to bridge the instability created by the banking system in the colonial epoch. The fiscal sector was used by authorities for nest eggs mobilisation and as an avenue for directing capital financess into productive ventures and activities to rush up economic development. The authorities domineered the post-independence banking epoch with the intervention in control, ordinance and ownership of Bankss, including the bank of Ghana. The Bank of Ghana could non take determinations on financial and pecuniary policy without confer withing with the Ministry of Finance since it was denied liberty ( Ziorklui et al. , 2001 ) . Due to this, most Bankss in this epoch were province owned and few were both authorities and foreign owned Bankss.

The Banking Act of 1970was promulgated to increase fiscal and banking prudence every bit good as supply a model for banking. This was done to turn to the high rising prices, low involvement rate, high non- acting loans and hapless public presentation of Bankss. The economic environment at the clip which was characterized by low involvement rate and high rising prices turned to kill public assurance in the banking system thereby coercing people to put in physical assets and high yielding authorities bonds and recognition Unions.

The banking sector in the early 1980s was afflicted by inefficiency, non-performing assets ( toxic assets in today ‘s idiom ) , bank losingss ( Leite, 2000 ) and dominated by Ghanese Bankss and few foreign Bankss. The three biggest commercial Bankss in footings of assets in Ghana at the clip accounted for 55 % of entire assets with a province bank having 25 % of entire assets and 20 % of bank sedimentations ( Buchs and Mathisen, 2005 ) . The few Bankss in the banking sector means there was a deficiency of competitory market for advanced merchandises, engineering and quality service bringing for clients. This meant the right internal procedures were non set up to run into clients.

In drumhead, commanding banking activities forestalled the development of a competitory banking environment of continual merchandise development, modernized engineering ensuing in hapless service, delayed clip and loss of investor assurance and decreased merchandise pick.

Post Banking Reform Era

The developments in the station banking reform epoch can be summarized as being moved from an environment of terrible fiscal hurt and disfunction in the banking sector, illiquidity and insolvency, recognition rationing and involvement rate controls to a market based government and beef uping bank supervising to guarantee increased profitableness and efficiency ( Acquah, 2006 ) .

Under the umbrella of the Economic Recovery Programme ( ERP ) , the Financial Sector Adjustment Programme ( FINSAP ) was embarked upon in order to suppport the banking sector as a pillar of economic development. This was done in two stages. FINSAP 1 stage allocated a proviso for the liberalisation of the banking sector and transforming or reconstituting Bankss in fiscal troubles ( Brownbridge et al. , 1998 ) . Restructuring of the banking sector was critical since Bankss had an of import function of back uping the economic system and complecting other economic activities and as such the prostration of the Bankss will hold black effects on the economic system. FINSAP 2 introduced new dimensions to the full fiscal sector by doing commissariats for denationalization of state-owned Bankss, human capital development, technological betterments and prudent ordinance and supervising of the fiscal sector by Bank of Ghana. The 2nd stage of the reform besides introduced prudent banking ordinances by revising the 1970 Banking Law and the debut of 1989 and 2004 Banking Laws which defined minimal capital demands of Bankss and other fiscal sectors to guarantee that they had a batch of capital. After the execution of FINSAP 2, Bank of Ghana continues to implement strong ordinances and supply the needful supervising of Bankss and develop modern payment and colony system. Bank of Ghana ‘s Payment Systems Development scheme was aimed at bettering the bringing of fiscal services to heighten fiscal intermediation through the usage of engineering by developing electronic payment merchandises such as e-money, cyberspace banking, telephone banking, ATM services, transportation of financess at Point of Sale and SMS banking. The debut of ‘e-zwich ‘ to the market was done to supply a common platform to complect all the banking establishments with a biometric smartcard ( Acquah, 2009 ) . It has been noted that the usage of ICT by Bankss in the proviso of fiscal services has yielded positive consequences by bettering their service bringing and fiscal public presentation.

3.6.3 Bank of Ghana: Legal and Regulatory Framework

The Bank of Ghana is the cardinal bank in Ghana and has been mandated to hold overall supervisory and regulative authorization in all affairs associating to banking and non-banking fiscal concern with the intent to accomplish a sound, efficient banking system in the involvement of depositors and other clients of these establishments and the economic system as a whole. To heighten the legal and regulative model, the Bank of Ghana supervisory maps are designed to be consistent with the Basel Core Principles for Effective Banking Supervision. The regulative and legal models within which Bankss, non-banks fiscal establishments every bit good as forex agency operate in Ghana are the undermentioned:

· Bank of Ghana Act 2002, Act 612

· The Banking ( Amendment ) Act 2007 ( Act 738 )

· Non-Bank Financial Institutions Law 1993, PNDC Law 328

· Companies Code Act 179, 1963

· Bank of Ghana Notices a?• Directives a?• Circulars a?• Regulations

The Bank of Ghana is hence charged with the duty of guaranting that the fiscal system is stable to guarantee that it serves as facilitator for wealth creative activity, economic growing and development. The Torahs regulating banking operations have commissariats sing licensing, backdown of licence, and agreement for analyzing and supervising Bankss, powers and responsibilities every bit good as protection of the supervisor.

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