Bank of Ghana
Bank of Ghana

As the Bank of Ghana intensified its efforts to sanitize the country’s banking industry a top banking executive urged the state here on Thursday to split the central bank to enable it play its regulatory and monetary rolls more effectively.

Frank Adu Jnr, Managing Director of Cal Bank one of the leading local banks noted that with the expansion of the financial sector, the Banking Supervision Division (BSD) of the central bank at its current state would not be able to do any effective supervision.

This came after the liquidation of two local banks (UT Bank and Capital Bank) in 2017 the appointment of Administrators for UniBank and the appointment of an Advisor for Sovereign Bank this year by the central bank as the local banks reel under low Capital Adequacy Rations and non-performing loans.

Although the affected banks were accused of bad management practices leading to insolvency, industry watchers also accused the central bank for sitting by to watch the banks go down under.

“I think today, with about four hundred NonBank Financial Services (NBFIs) more than 30 commercial banks, all these other saving and loans companies coming up, the BSD cannot just sit in their offices and be able to supervise them properly,” the MD said.

Speaking during Cal Bank’s Facts Behind the Figures encounter at the Ghana Stock Exchange (GSE) Adu Jnr was of the view that the BSD will need an army of about 2000 people which would make it a very large institution to be able to do its work.

He argued that Bank of Ghana had been overburdened hence his call for the reforms which would look at its various roles and responsibilities and categorize them so that the Central Bank would retain its core activity of monetary policy formulation and financial stability.

He urged authorities to take a cue from the British experience where the Financial Conduct Authority was split from the Bank of England.

On the shrinking loan books of banks in the era when government of Ghana was seeking to grow a private sector led economy the MD said banks would naturally slow down and shrink their loan portfolios looking at the recent adjustments in Interest Rates.

Adu Jnr said this was not because the banks did not find the transactions but they needed to protect their Balance Sheets.

“Until we adjust properly to these new interest rate levels where we know how much income we are losing we are not necessarily going to go up there and blow up our Balance Sheet by increasing the loan book at a very high rate. We have to tread cautiously,” he insisted. Enditem

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