Are Ghanaian Banks Over-Regulated by the Bank of Ghana?

“Great minds discuss ideas; average minds discuss events; small minds discuss people.”- Eleanor Roosevelt.

“Great minds discuss ideas; average minds discuss events; small minds discuss people.”- Eleanor Roosevelt.

When I was a boy growing up in Sunyani, the Regional capital of the then Brong Ahafo Region some forty-something odd years ago, young children were encouraged to own bank accounts with various banks so that they can learn early in life, the habit of banking and saving. I recalled this fact recently when my seventeen-year-old son was refused the right to DEPOSIT money in one of my accounts at the Consolidated Bank, Ghana. According to the staff at the branch where the incident happened, this was because of a Bank of Ghana (BoG) regulation. I have been thinking, but for the life of me, I fail to understand why a person below eighteen years cannot deposit into an account at a bank, even without identification.

At another time, I sent the same young man to a branch of the same bank to make a withdrawal. He had an identification card on him, but he was turned back. Again, he was not eighteen years old, and the bank was not accepting the Ghanacard.

For me, this is dead wrong. To begin with, I cannot understand why a person below eighteen years cannot make a withdrawal from a bank, all other conditions being satisfied, and then again, I wondered why the insistence on a Voter I.D. Card issued in a particular year.

In any case, the cheque leaf that the bank gave me is a security document given by the bank certifying that it is the bank that issued that paper. It is authenticated by the particular bank, usable only by that bank as legal tender. Further, that cheque leaf carries the bank account number as well as the bank name and is security that whenever I present it, with appropriate signatory authorization at the back, I would be given access to my money that is with the bank. Why should it be the case that the bank would refuse to honour its certificate because the person who presents it is a minor?

Why should a person who walks into a bank to deposit into an account be turned away because that person is a minor? After all, for banks, money is stock. It is what they trade-in. If the money that is delivered into the account turns out to be from the wrong source or even an unlawful source such as the proceeds of a crime, the money would then become evidence or exhibit, and in the meantime, it is available to the bank as stock. In any case, under current laws in Ghana, a bank is enabled to report such transactions to the Financial Intelligence Unit. In my view, it would be better to accept the deposit from the minor and go ahead to make a report to the FIC, than to turn the person making the deposit away.

I am sure that some people would reply, in answer to these statements that the regulations are to prevent money laundering. Well, the larger effect of such strictures is to scare away the many who would otherwise have been willing, from accessing the products of the banks.

So, in the face of all these ‘regulations’, I asked myself whether the Bank of Ghana is killing Ghanaian banks with over-regulation? Let me illustrate.

Recently, a friend of mine needed a new company account to conduct a business. He already had other accounts for other companies in good condition, and again, he had a current account operated by the company he wished to establish with another bank. But he needed the new account for a purpose. So he went to UBA. And that is where he came in contact with the BoG ‘regulations’. Eventually, a UBA staff actually (true story) returned his initial deposit to him. The account was not opened.

A few years back, the BoG announced that banks in Ghana should recapitalize and unilaterally increase the minimum capital requirements for all local banks. The legality and constitutionality of this decision have been challenged, but it is all too clear that if many of the world-famous banking names we are all familiar with had faced such deliberate obstacles, they would not be the giants we see today. I refer to the likes of Barclays and Rothschilds.

Indeed, what enables all businesses to prosper, over a period, is not how vast the capital the business set out with, but how well and how wisely the business is managed. It would seem that in the case of Ghana, however, we have substituted capital for pragmatic management. Otherwise, how and why should a bank, that is prospering and well-managed by all accounts, be forced into sudden insolvency because a regulator has decided that the capital base of the business is too small? In any case, it becomes very problematic when one considers the fact that firstly, that institution was first granted legal authority to operate by the same regulator, and secondly that the business was well-managed and prospering before the regulator decided that it needed greater capital.

I believe that it may well be necessary for Ghanaians and the government to become interested in the regulatory decisions the Bank of Ghana has been assuming viz a viz local banks in recent times because these regulations are not regulations intended to ensure the growth of local banks. Rather, they could be intended to stifle all innovation in local banking, so that the field would be left clear for a few of the big international players.















Source: The Daily Searchlight

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