In a major ruling, the High Court presided over by Justice Nana Brew affirmed the Bank of Ghana’s (BoG) authority in overseeing and regulating the appointment of key management personnel within banks, including the dismissal of an application for judicial review filed by George Smith-Graham, a former director of Universal Merchant Bank (UMB).

The court’s decision reinforces the regulatory powers granted to the BoG under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), and underscores the necessity for compliance with directives aimed at ensuring sound corporate governance in the banking sector.

Background and Legal Context

On July 22, 2022, the BoG issued a directive under Act 930 and the Corporate Governance Directive 2018, mandating all commercial banks, including UMB, to obtain prior written “No Objection” from the BoG before redesignating an existing non-executive director to any other position. This directive aimed to strengthen the regulatory oversight and ensure that banks adhere to sound governance practices.

However, on July 5, 2023, UMB appointed Mr. Smith-Graham as its board chair at an emergency meeting without seeking the required “No Objection” from the BoG. The central bank subsequently notified UMB of this breach and instructed the bank to apply for the necessary approval. UMB, however, contended that it did not require BoG’s approval based on legal advice and refused to comply with the directive. In response, the BoG exercised its authority under Act 930 and revoked its approval of Mr. Smith-Graham’s appointment as a director.

The Legal Challenge and Court’s Deliberation

Dissatisfied with the BoG’s decision, Mr. Smith-Graham filed for a judicial review, arguing that the central bank overstepped its bounds under Section 102 of Act 930 by revoking his appointment. He further contended that even if the BoG possessed such power, it was legally obligated to provide him a hearing before taking any action.

The BoG defended its actions, asserting its broad regulatory powers under Act 930, including the authority to revoke appointments if necessary to uphold the integrity of the banking sector. The central bank emphasized that its actions were justified based on the information obtained through its investigations and that the exchange of correspondence with UMB provided sufficient opportunity for the bank and the director to present their case.

Court’s Ruling and Key Findings

The High Court, in its ruling, upheld the BoG’s actions as lawful and within its regulatory powers. Justice Nana Brew emphasized that the purpose of Act 930 is to enhance the BoG’s supervisory capabilities, ensuring that banks operate within the bounds of legal and regulatory frameworks. The court highlighted that Section 102 of Act 930 grants the BoG extensive powers to address violations of its laws and regulations, including the removal of directors.

The court dismissed the applicant’s argument that the BoG lacked the authority to revoke a director’s appointment without a formal hearing. It noted that the correspondence between UMB and the BoG provided adequate engagement, thus fulfilling the requirement for due process. Moreover, the court clarified that the Companies Act, 2019 (Act 992), which generally governs corporate governance matters, does not limit the specific powers granted to the BoG under Act 930. The specialized nature of Act 930 in regulating banks supersedes the more general provisions of Act 992 concerning the removal of directors.

The High Court’s dismissal of Mr. Smith-Graham’s application for judicial review reinforces the regulatory framework within which the BoG operates. The ruling underscores the necessity for banks to adhere strictly to directives issued by the central bank, particularly concerning the appointment and redesignation of key management personnel. It also reaffirms the BoG’s authority to take decisive actions, including revoking appointments, to maintain stability and integrity in the banking sector.

This decision serves as a critical reminder to financial institutions of the importance of compliance with regulatory requirements and the need to engage constructively with the BoG. It also highlights the judiciary’s role in upholding the legal frameworks that govern the financial sector, ensuring that actions taken by regulatory bodies like the BoG are lawful, reasonable, and aimed at promoting sound governance and financial stability.