Review the universal banking model – Expert to BoG


Dr. Richmond Atuahene, a banking expert has raised questions about the universal banking regime being practiced in Ghana. According to him, making all commercial banks to acquire a universal banking licence is not the best so, the Bank of Ghana (BoG) must review and change it.

The universal banking licence model cannot be uniformly applied to all commercial banks because their mission and strategy are not the same, Dr. Atuahene said.

A universal bank is a financial service conglomerate combining retail, wholesale and investment banking services under one roof and reaping synergies between them. A universal bank participates in many kinds of banking activities; it is both a commercial bank and an investment bank as well as providing other financial services such as insurance.

Dr. Atuahene who is the Chief Executive Officer (CEO) of Universal Capital Management Limited, was speaking at a banking forum called ‘AccraSpeaks’ at the Kempinski Gold Coast Hotel, Accra on April 27, 2018 on the theme: ‘Governance of the Banking System in Ghana: Is the Central Bank Failing?

“I urge Bank of Ghana to improve its supervisory oversight, particularly with universal banks. When I talk about universal banking [in Ghana] some of you don’t know the genesis of it,” Dr. Atuahene said.

He went on: “Universal Banking concept was adopted in 2003 when we replicated it from Nigeria in 2001. Nigeria tried it for 10 years and in 2011, the governor then [of the Central Bank of Nigeria (CBN)] saw that he had gone too far with universal banking and, today, he has abandoned it. Why has he abandoned it? Because of the challenges he faced between 2007 and 2011…because universal banking license gives you license to do all things,” he explained.

Dr. Atuahene said Nigeria, has abandoned universal banking system because of the challenges it poses to banks, so the regulator in Ghana cannot continue to make all banks to keep practicing universal banking system when they do not have the management capacity to do so.

A contributor at the Accra Speaks Forum
A contributor at the forum

“You can choose to do brokerage, you can choose to do whatever but, the question is, have you got the capacity to do universal banking? Nigeria has since 2011 re-classified and re-tiered banks. After the universal banking they realised everybody now wears the same shoe size.”

He advocated that a tiered-system of banking where different banks operate as mortgage, investment, development or commercial banks with different capital requirements is what is best for the Ghanaian economy.

“So, today in Nigeria, they have commercial banks and development banks, each with its capital, risk appetite and the permissible activities they can do. Why do you want to do everything (under universal banking) when you don’t have the capacity? When you talk about it they say the Ghanaian economy is already tiered. Tiered like what?” he asked rhetorically.

Currently, the Bank of Ghana, the regulator of the banking industry in the country, in September 2017 increased the minimum capital requirement for all universal banks in the country from GH¢120 million to GH¢400 million. All universal banks, no matter their size and balance sheet, are supposed to meet the capital requirement by December 2018.

Sensing that many of them may not be able to meet this huge increase, the CEOs of indigenous Ghanaian banks went to meet the president of the country, Nana Akuffo-Addo to petition him to ask the BoG to review its stance on the new minimum capital requirement. Subsequently, the BoG governor, Dr. Ernest Addison, came out to say that the December deadline for all banks to meet the minimum capital requirement still stands.

But, according to Dr. Atuahene, applying a uniform capital requirement for all universal banks, no matter what their core mission, will have serious consequences.

A participant at the Accra Speaks Forum
A participant

“If you tell Ghana Home Loans (GHL) that you are a universal bank, to me it is a serious issue. You [mean to say that GHL will] go and take people’s deposits and use it to build houses? That is the endpoint of their (customers) deposit. So why don’t you say that this is a mortgage bank, that this is his capital limit, this is what they can do. So, it even gives you a better overview of that,” Dr. Atuahene, who is a former lecturer at the Ghana Banking College, asserted.

“Nigerians have done it but we (Ghana) are like ostriches, we will not go anywhere…we will see the damn consequences of it,” he warned.

Speaking at the same forum, Jonathan P. McCann, the founder of JPCann Associates, a management and capacity building consultancy company that provides business advisory services, accountancy and finance services for companies, agreed with the submissions of Dr. Atuahene.

McCann said that not all banks in Ghana need to have GH¢400 million to operate and do the business of banking because other banks have their own strategy and model. Applying a one size fits all regulatory model must be looked at again, in his view.

McCann revealed that Nigeria, Africa’s biggest economy, has differences in its economy and so we in Ghana cannot compare ourselves to Nigeria in adopting a universal banking model.

Corporate governance guidelines

Dr. Atuahene commended the Central Bank for bringing out new corporate governance guidelines for banks in Ghana. However, he said they were not expansive enough. For example, he said whereas sub-committees of bank boards had mandates, the board itself does not have mandates. New board members who are appointed to serve on boards need orientation on what their mandates are.

Banking Forum, Accra Speaks

He also suggested that the cooling off period of one (1) year for staff of BoG who retire and then go and serve on the board of universal banks is too short. A Central Bank official, who has privileged information, and goes to serve on the board of a bank after a year will be armed with banking sector information that can help that bank to the detriment of competitors.

He advised the Bog to increase the cooling off period from one year to something longer. In the United Kingdom, the cooling off period is 10 years and in the United States, it is seven (7) years.

Dr. Atuahene further said the Central Bank should treat the corporate governance guidelines with all the speed and alacrity it needs. Banking is dynamic so the BoG must have the capacity to move along with the changing industry.

“If BoG wants to strengthen supervisory and regulatory functions, I urge them to be up and doing in training more versatile, competent and proactive people in the management and supervision of the banks. We should not adopt the reactive supervision we have being doing. We should be more proactive, walking ahead of the banks,” he advised.

GB&F Magazine

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