Ghana’s Parliament has passed the Banks and Specialised Deposit-Taking Institutions Bill, 2015 into Law.
The purpose of the Act is to amend and consolidate the laws relating to deposit taking, and to regulate institutions which carry on deposit taking business.
As Ghana transitions to an upper middle income economy, there is the need to scale up the financial markets particularly banking to effectively mobilise financial resources from domestic and international markets to finance the accelerated growth process.
The passage of the bill into law will therefore benchmark the legal and regulatory frameworks set out in the Act with international financial standards setters including the Basel Committee of Banking Supervisors (BCBS). This will help develop further the banking industry and the entire financial services sector in the country.
The Act is also expected to strengthen licensing procedures, consolidate supervision and cross border supervision given the growing importance of conglomerates foreign banks.
It further seeks to address supervisory and regulatory gaps to enable the Bank of Ghana superintend financial service providers in the microfinance business, address bank resolution, ensure financial consumer protection and promotion of innovation and financial inclusion.
There are distinctive gaps in the frameworks for bank resolution or insolvency and the regulatory and supervisory oversight of the financial system which undermine the capacity of the Bank of Ghana to deal with potential crisis. For instance, banks’ conglomerates in Ghana’s financial sector are identified to have subsidiary securities firms, industrial and insurance companies. Since the banks are not adequately supervised on a consolidated basis, it is possible that related party lending leak out unnoticed and the potential risks resulting from the inter-linkages may lead to the systematic effect. Currently, cross-border contagion is an important risk as the collapse of a parent bank could easily undermine confidence in the subsidiary and trigger a deposit run on banks of equal status. The Act therefore seeks to address these emerging risks.
The Act entitled ‘Banks and Specialised Deposit-Taking Institutions Act, 2015, seeks to amend and consolidate the laws relating to deposit-taking, regulate institutions which carry on deposit-taking business and to provide for related matters.
The Act, which is a one hundred and sixty Clause (160 Clauses) applies to Banks, Specialised Deposit-Taking Institutions, Financial Holding Companies and Affiliates of Banks, Specialised Deposit-Taking Institutions and Financial Holding Companies.
The Act does not apply to Credit Unions which are subject to licensing and supervision under the Non-Bank Financial Institutions Act, 2008 (Act 774).