Question

1. The Regulation of Banking Sector in Ghana.

2. The Role of Audit in Banks sustainability

3.The impacts of corporate Governance on the Ghanaian Banking Sector

Answer 1

1.

Following regulatory and legal framework operates in Ghana which covers bank, non financial institutions and forex bureau:

• Bank of Ghana Act 2002, Act 612
• Bank of Ghana (Amendment) Act, 2016 (Act 918) Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930)
• Non-Bank Financial Institutions Act, 2008 (Act 774)
• Companies Act, 1963 (Act 179)
• Bank of Ghana Notices /Directives / Circulars / Regulations

The Bank of Ghana is therefore, charged with the responsibility of ensuring that the financial system is stable to ensure that it serves as facilitator for wealth creation, economic growth and development.

The functions and responsibilities of the Central Bank as a Regulator are defined in Act 612 and Act 673 as follows:

• To regulate, direct and supervise the banking system to ensure the smooth operation of a safe and sound banking system
• To appoint an officer designated as the head of Banking Supervision Department, who shall be appointed by the Board
• To consider and propose reforms of the laws relating to banking business

Consequently, the Central Bank exercises its mandate to ensure that:

• Depositors' funds are safe
• The solvency, good quality assets, adequate liquidity and profitability of banks are maintained;
• Adherence to statutory and regulatory requirements is enforced;
• Fair competition among banks
• The maintenance of an efficient payment system

To enhance the legal and regulatory framework, the Bank of Ghana supervisory functions are designed to be consistent with the Basel Core Principles for Effective Banking Supervision.

2. Banking sector play a very vital role in the contributing to financial stability of a country. To enhance the effectiveness of supervisions , external auditors perform audit. An external auditor plans and perform the audit of a Bank's Financial statement to obtain reasonable assurance about whether the financial statement are free from material misstatement, whether due to fraud or error, and are prepared, in all material respects, in accordance with an applicable financial reporting framework.

External auditors of banks can play an important role in contributing to financial stability when they deliver quality bank audits which foster market confidence in banks’ financial statements. Quality bank audits are also a valuable input in the supervisory process.
Audit function is organized as a function of the internal control of a credit institution together with risk control and compliance function.It helps the bank with fulfill its objectives by supplying a systematic disciplined method of assessment and improvement of efficiency of risk management, control management and corporate governing processes

3.Various studies has been done on the impacts of corporate governance on the Ghanaian banking sector.

The results shows how corporate governance can influence the quality of asset among banks.

As per the results non-executive board member ratio has a significant inverse nexus on NPLs. The presence of outside directors tend to reduce the rate at which loan defaults. Further, board gender has a significant and a direct relationship on NPLs. It has been noticed that board is composed of more female directors. Loans tend to underperform leading to increase in NPLs. Inflation variable has been significant and has a positive relationship to NPLs of banks in Ghana. 　

Ghana implemented IFRS for the banking industry in 2008. Preparation for the adoption of the Base II/III capital framework has started. In house committees working on the key areas and building the capacity. Readiness assessment is currently being conducted.