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Photo Courtesy: Abod |
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ADDRESS BY DR. PAUL A. ACQUAH,
GOVERNOR, BANK OF GHANA
on the occasion of the launch of
Intercontinental Bank Ghana Limited
Ghanadot - The advent of
new banks in Ghana has gone up
with five universal banks already operating in the country.
Authorities in government and the financial sector are quite
divided over what this implies for the
national economy. While government officials say it
is a reflection of confidence in the economy some industry
players say the advent of Nigerian banks in Ghana should be
watched since they could throw the economy into jeopardy if
they pull out in a dire situation.
President John Agyekum Kufuor was the special guest of
honour at the august event.
Dr. Acquah's address
Mr. Chairman,
Your Excellency the President of the Republic of Ghana,
Honourable Ministers of State,
Directors of Intercontinental Bank Ghana Limited,
Distinguished Executives of the Banking Industry,
Invited Guests,
Ladies and Gentlemen,
1. I feel greatly honoured to be invited to be part of the
occasion of the official launch of Intercontinental Bank
Ghana Limited. I wish to use this opportunity to welcome you
into the Ghanaian banking market as a full fledged universal
bank, with a paid-up capital in excess of the Bank of
Ghana’s requirement of ¢70 billion.
2. Mr. Chairman, the launch of Intercontinental Bank Ghana
Ltd today brings to three the number of banks commissioned
in the course of this year alone (the other two being
Guaranteed Trust Bank Ghana Ltd and the Fidelity Bank Ghana
Ltd). This launch also brings to four the number of banks
with parent banks from the sub-region. This is in line with
the Bank of Ghana’s commitment to enriching the Ghanaian
banking landscape with a mix of banking cultures, including
a significant dose from the sub-region. Looking ahead we
will continue to pursue the policy of consolidation and
diversification of the banking system into a globally
competitive one, new entry of foreign banks limited to truly
internationally active banks and financial institutions that
offer added value in terms of focus and experience.
3. Mr. Chairman, Intercontinental Bank Ghana Ltd comes into
the Ghanaian financial sector with a wealth of experience in
banking in the sub-region and I hope the brand of banking it
offers would serve to benefit customers. I am particularly
happy to note that, the focus of Intercontinental’s
operations is geared towards meeting the needs of the micro
and small scale entrepreneur. The bank has demonstrated this
by setting up a specialised department to ensure that micro
and small enterprises receive adequate support from the
bank.
4. Mr. Chairman, I understand that this bank’s business
model involves the deployment of state of the art
information technology systems that will enable the delivery
of superior service and strong control systems, focusing on
process audit and risk management. The role of information
and communication technology (ICT) in today’s banking is
critical. I should perhaps state again that while the
central bank is supportive of banks’ efforts in modernizing
their ICT infrastructure our focus is on seeing a
harmonization of these developments in the industry, so as
to ensure inter-connectivity and inter-operability and
thereby maximize the benefits for bank customers.
5. A related issue with regard to IT, Mr. Chairman, is the
increased exposure to the risk of fraud. I hope that this
Bank would adopt good and effective internal control
policies that would effectively check this risk, safeguard
the assets of the bank, and protect the integrity of the
financial system as a whole.
6. The scope of risk taking and pricing of risks in the
economy is still constrained by the legacy of instability
that increased the probability of default and encouraged
banks to invest mostly in riskless assets (e.g. Treasury
Bills) and to a lesser extent corporate debt as a matter of
preference. With this experience, banks have tended to price
their services in such a way that spreads have continued to
remain very high and wide. Lending rates remain very sticky
downwards even with falling inflation and greater macro
economic stability.
7. Mr. Chairman, the prevailing view in the market is that
the banking system is characterised by high cost of credit,
and lack of transparency in the disclosure of bank charges.
We keep receiving complaints from bank customers who
continue to feel that there is the need for the
re-introduction of regulation on fees and charges. Mr.
Chairman, in the current dispensation banks have the freedom
to determine their own interest rates and charges and
commissions for services they provide and there is no need
to re-introduce regulation in this aspect of banking.
However, it is fair for the public to demand transparency in
the pricing of products. The Bank of Ghana would continue to
periodically publish fees and charges information in the
dailies for the public to make their own informed choices
and to promote competition in the industry. At the same
time, borrowers have the obligation to honour their debts
and meet their obligations in full to avoid burdening the
banks with the cost of non-performing loans and spreading
this cost to credit-worthy customers.
8. In that regard, Mr. Chairman, an important area of
concern is the lack of a centralized database of credit
information, which has been identified as a major reason for
high loan default and cost of intermediation. The recent
passage of the Credit Reporting Bill will pave the way for
the establishment of Credit Reference Bureaux (CRBs). The
availability of a public database will reduce information
asymmetry and facilitate a better evaluation of individual
borrowers’ credit risk and thereby spur an expansion in
consumer and small and micro-business lending. We hope that
Intercontinental Bank will cooperate with the CRBs to
enhance transparency and improve credit risks assessment in
the system, protect credit quality, and reduce the cost of
borrowing.
9. Mr. Chairman, Intercontinental Bank is entering the
banking industry at a time of significant changes in the
macro economic environment and the banking system. The
banking industry is growing increasingly competitive with
the consolidation of macroeconomic stability. The foreign
exchange regulations are overhauled with the New Foreign
Exchange Bill to make it investor friendly. The payment
system is being modernised with a common switch and a smart
card to be introduced next year. And, there is the
redenomination of the cedi in July 2007 which potentially
provides efficiency gains by transforming the nature of
business transactions and should underscore policy
commitment to macro-stability. All this provides a platform
for effective financial intermediation and the building of a
globally competitive financial industry. This is a challenge
and an opportunity for Intercontinental Bank as well as the
competition.
10. Mr. Chairman, the central bank will continue to support
efforts of the banking industry by pursuing policies that
foster macroeconomic stability and financial stability for
effective financial intermediation. We will intensify our
supervision and regulation of the financial system to ensure
its integrity and efficiency in order to capture the
benefits to be gained from liberalization and competition in
the industry. To this end, the Bank of Ghana will be moving
from its current form of supervision to the risk-based
supervision framework come next year and hope banks will put
the necessary structures in place towards the adoption of
the framework.
11. In closing, Ladies and Gentlemen, I would like to
sincerely congratulate the Intercontinental Bank Ghana Ltd
for this giant effort in acquiring and transforming from a
non-bank financial institution to a fully fledged universal
bank and wish you every success in all your operations.
Thank you all for your attention.
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