At the 60th anniversary celebration of Bank of Ghana (BoG)
By: Anthony Sedzro
President Nana Akufo-Addo has advised the Bank of Ghana, the regulator of the banking industry, to take decisive steps to address the weaknesses inherent in Ghana’s banking sector. According to the President, the BoG has played a pivotal role in the economic growth of the country so, it must take steps to instil discipline as part of its oversight responsibility of the financial sector.
“The need to entrench reputation and credibility in the financial system is crucial. A weak banking system undermines growth and, on this basis, the current weaknesses in our banking sector need to be addressed forcefully to minimise any adverse financial consequences to unsuspecting savers, and their spill-over effects on the economy,” the president admonished.
President Akufo-Addo was delivering the keynote address on the theme, “Celebrating 60 Years of Central Banking: Achievements, Challenges & Prospects”, as part of the 60th anniversary celebration of the bank at the Kempinski Hotel Gold Coast City, Accra on Friday, 18th August, 2017.
The president said the Central Bank faced significant challenges in the banking sector such as high cost of funds, weeding out unlicensed institutions, protecting depositor’s funds and providing access to finance for poor people living in rural areas. However, the manner the BoG dealt with the recent collapse of UT Bank and Capital Bank, demonstrates that the Central Bank is ready to confront the challenges.
“The most recent measure in intervening decisively in the matters of UT Bank and Capital Bank demonstrates your preparedness to act in a manner worthy of a responsible central bank of praise worthy regulator. I am confident that you have the support of the nation,” he said.
Fiscal and monetary policy match
President Akufo-Addo, whilst congratulating the past governors, board and staff of the bank on a successful 60th anniversary, said that the anniversary is timely as the country itself is celebrating 60 years of nationhood. He disclosed that this should mark the beginning of a partnership between the monetary policy of the Central Bank and fiscal policy of the Ministry of Finance for economic growth.
“Under my leadership and watch, I insist that there must be greater fiscal and monetary policy co-ordination to promote and sustain macroeconomic stability,” he advised. “This is the only way by which we will enable the private sector to flourish and create the needed jobs within the economy,” he added.
“History has taught us well that monetary policy must complement fiscal policy to create an enabling macroeconomic environment to promote growth and development of the Ghanaian economy.” Despite the BoG enjoying independence under Ghana’s laws, he said both the government and the BoG must work together.
“While the President appoints the Governor and his deputies, as well as members of the Board of Directors, the bank is guaranteed its operational independence in order to deliver on its multiple mandates. Full autonomy for the bank, however, does not mean that the bank’s monetary policies should be at variance with government’s overall macroeconomic policies,” he cautioned.
Dr Ernest Addison, the BoG governor, in his welcome address, remarked that when the bank was established in 1957, its role was defined to support the aspirations associated with the country’s attainment of independence. However, after 60 years, there is a new operating environment in a different macroeconomic context and challenges which required a different response.
According to him, the bank adopted a new paradigm on monetary policy.
“On monetary policy formulation and implementation, the Bank officially adopted inflation targeting framework a decade ago, with the Monetary Policy Rate as the main policy tool,” Dr. Addison said.
“The sector continues to record asset growth and remains liquid, although some financial soundness indicators have weakened in recent times, raising concerns for financial stability. For instance, the prevalence of high non-performing loans reduces liquidity which impacts negatively on profitability, and broadly obstructs transmission mechanism of monetary policy.”
He revealed that the withdrawal of the licenses of UT and Capital banks was to safeguard the sector’s stability.
“Just this week (14th – 18th August), the Bank of Ghana revoked the licenses of 2 banks…this, together with other prudential and supervisory measures introduced by the Bank of Ghana, is geared towards safeguarding the stability of the financial system and creating a healthy financial sector capable of supporting the transformational agenda of the Government,” Dr. Addison added.
The event had in attendance the Vice-President, Dr. Mahamudu Bawumia; Celestin Monga, Chief Economist and Vice-President, African Development Bank; Razia Khan, Head of Economics, Standard Chartered Bank Africa; Timothy Lyman, World Bank; Central Bankers from other African countries; past governors of the BoG, amongst others.
Various gifts and memorabilia were presented to the BoG by the central banks of Mozambique, Zambia, South Africa, Mauritius, Botswana, Lesotho and Swaziland.
As part of the celebrations, there was a symposium on emerging topics relevant to BoG’s operations, an exhibition of old currencies, and documentation and pictures chronicling the bank’s history.