In response to the persistent issues of poor corporate governance that plagued Ghana’s financial sector, the Bank of Ghana (BoG) has issued a stern notice to banks, specialized deposit-taking institutions (SDIs), and the general public.

This notice disqualifies significant shareholders, directors, and key management personnel who fail to meet the stringent criteria set forth in various directives aimed at ensuring sound corporate governance.

The 2017-2019 banking sector clean-up by the BoG was necessitated by excessive and imprudent risk-taking, driven significantly by poor corporate governance. The fallout led to the failure of several regulated financial institutions (RFIs) licensed by the BoG.

In an effort to sustain the gains from this clean-up, the BoG introduced the Corporate Governance Directive in 2018 and the Fit and Proper Persons Directive in 2019. These directives were designed to embed sound corporate governance practices within RFIs and strengthen the BoG’s gatekeeping role in the financial sector.

Strengthening Governance Practices

To further enhance governance disclosure practices by RFIs, the BoG issued the Corporate Governance Disclosure Directive in 2022. This directive outlines regulatory expectations under Pillar III of the Basel Capital Accord, which pertains to regulatory and public disclosures.

It aims to ensure that significant shareholders, directors, and key management personnel possess the requisite knowledge, skills, and experience to perform their duties effectively. The Fit and Proper Persons Directive of 2019 sets forth standards that consider whether an individual has previously been a director of, or directly involved in the management of, any company or institution that: Had its license revoked; has been or is being wound up by a court of competent jurisdiction or other authority within or outside Ghana; has gone into receivership, insolvency, or involuntary liquidation.

These standards are integral in maintaining the integrity and soundness of RFIs. The BoG emphasizes the importance of RFIs ensuring the continuous fitness and propriety of significant shareholders, directors, and key management personnel as mandated by the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) and the Fit and Proper Persons Directive, 2019.

Disqualification Criteria

The BoG’s notice explicitly disqualifies individuals directly implicated in the 2017-2019 financial sector clean-up, along with all previous directors of failed banks and SDIs since the enactment of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930). These individuals are deemed unfit to hold key positions within RFIs under the fit and proper persons criteria.

Banks and SDIs are urged to take note of this disqualification and ensure compliance with the directives. They are responsible for upholding the highest standards of corporate governance by vetting their significant shareholders, directors, and key management personnel against the criteria set forth by the BoG. This measure is crucial to promoting the safety and soundness of RFIs, thereby safeguarding the stability of the financial sector.

The BoG’s notice serves as a reminder to the general public and stakeholders in the financial sector about the stringent requirements for holding significant roles within RFIs. It underscores the BoG’s commitment to maintaining a robust regulatory framework that prevents individuals with a history of poor governance and mismanagement from assuming influential positions in the financial sector.

The BoG’s latest notice is a decisive step towards reinforcing the gains achieved from the 2017-2019 banking sector clean-up. By disqualifying significant shareholders, directors, and key management personnel who fail to meet the fit and proper criteria, the BoG aims to foster a culture of accountability and sound governance within RFIs.

This initiative is expected to enhance the stability and resilience of Ghana’s financial sector, ensuring it remains a pillar of economic growth and development. Banks, specialized deposit-taking institutions, and the general public are encouraged to heed this notice and align with the BoG’s directives to promote a sustainable and well-governed financial ecosystem.