Dr. Johnson Asiama during the ongoing sensitization program for judges, called for effective implementation of Act 1015 and Act 930 and cautioned them to use their discretionary powers on financial law issues to support regulatory reforms in the financial sector.
In his key note address on the “Judicial Sensitisation on Insolvency and Beneficial Ownership Laws,” organized by the Office of the Registrar of Companies at Peduase Lodge in Aburi, the Governor of the Bank of Ghana (BOG) emphasized that a robust regulatory framework could protect financial institutions and the economy as a whole.
“A strong regulatory framework ensures compliance, protects the public interest, and promotes fair practices across sectors, safeguarding not just financial institutions but the broader economy as well.
“A resilient and robust corporate insolvency regime plays a critical role in strengthening Ghana’s corporate regulatory framework, which is an area in which the Bank of Ghana plays a vital role.”
Dr. Johnson Asiama, Governor of the Bank of Ghana (BOG)
Insolvency and Deposit-Taking laws
Dr Asiama explained that the Corporate Insolvency and Restructuring Act (CIRA), 2020 (Act 1015) is a modern charter for aiding distressed companies’ transformative development. He added that the act addresses insolvency issues in restructuring effective workout including debt.
Aligned with the statutory mandate of BOG to promote price stability, economic growth, financial stability, and effective operation of the banking and credit system, the Governor alluded to the fact that “the Bank recognises the value of a well-designed insolvency regime.”
He stated that prudential requirements, enforcement mechanisms, and corrective actions prompted by early intervention are provided by the Ghana Banking Sector. The Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) provides the legislative framework for these services.
“The Bank of Ghana takes insolvency seriously and works diligently, through its regulatory and supervisory roles, to prevent Regulated Financial Institutions (RFIs) and Specialised Deposit-taking Institutions from becoming insolvent.”
Dr. Johnson Asiama, Governor of the Bank of Ghana (BOG)
Dr. Asiama explained that insolvency extends to “severe balance sheet mismatches and an inability [of banks or SDI] to recover within a reasonable time,” and not just obligation shortfalls, high liability, or temporary illiquidity.
Effective implementation
The BOG in its effective regulatory supervision intend to reduce risk in the financial system and corporate debt to improve efficiency and restore profitability.
“It is imperative that weak banks or financial institutions that have the potential to create financial instability are handled properly to ensure the safety and soundness of the financial system.
“Sections 107 and 123 of Act 930 therefore mandate the Bank of Ghana to put a failed or failing bank or SDI through the resolution process.”
Dr. Johnson Asiama, Governor of the Bank of Ghana (BOG)
Dr Asiama intimated that resolution is determined when within a timeframe BOG is unable to restore the bank or financial institution. The resolution process is spelled in Act 930.
Meanwhile, under the same Act 930, section 123, the Central Bank is empowered to revoke the licence of insolvent banks or SDIs and appoint a receiver within sixty days of declaration.
“The laws on insolvency provide general guidance on the effective implementation of insolvency processes and procedures, [but] they may not always address all possible scenarios. Thus, judicial intervention becomes essential to address grey areas of the law.”
Dr. Johnson Asiama, Governor of the Bank of Ghana (BOG)
The Governor added that in the absence of any findings of breaches of the rules of natural justice and due process, adverse court determinations against administrative decisions of the Regulator in insolvency proceedings have the tendency to create significant legal uncertainties.
Seeking Redress
According to Dr. Asiama, when aggrieved under any BOG decision in any of these capacities; A prompt corrective action undertaken by the Bank under Sections 102–106 of Act 930; The appointment functions of an Official Administrator under Sections 107–122 of Act 930; and the revocation of licence and the appointment of a receiver under Sections 123-139 of Act 930, arbitration under the rules of the Alternative Dispute Resolution Centre (Section 141 of Act 930) established under the Alternative Dispute Resolution Act, 2010 (Act 798) should be resorted to.
The unyielding role of judicial oversight in bank proceedings was emboldened in the case of Dr. Papa Kwesi Nduom & Others v. Bank of Ghana & Others (GN Bank), Civil Appeal No. J4/07/2023, (19th July 2023).
As per the ruling of the Supreme Court, the Human Rights Court has jurisdiction to hear bank resolution cases involving allegations of breaches of administrative justice.
This case, the Governor pointed out that “the crucial role of judicial oversight in bank resolution proceedings in ensuring that the process is administered in accordance with law and within the legal framework governing such complex matters.”
This awareness training program, the Central Bank Governor believes, will promote the needed reform in the financial system and complement the BOG’s commitment in providing efficient and effective corporate credit system and insolvency regime.
