Banks and Specialized bill passed

A Member of the Finance Committee of Parliament, Benjamin Kpodo has lauded the passage of the Banks and Specialized Deposit-Taking Bill, which he reckons has ‘come at the right time’ to deal chiefly with the licensing and operations of the financial institutions.

Following the passage of the bill, the Member of Parliament for Ho Central urged financial institutions to comply with provisions in the approved bill, which now awaits presidential assent to become a law.

The passage of the bill is seen as a major boost to the banking sector, and follow on the heels of the Deposit Protection Bill which the 275 members of the legislature passed last week.

In clarifying the difference between the Deposit Protection bill and the Banks and Specialised deposit-taking bill, Mr. Kpodo said: “one creates the insurance scheme-the other one seeks to regulate how they operate-licensing, reporting, their relationship with the Bank of Ghana.”

According to contents of the Banks and Specialized Deposit Taking bill, it will seek to address the supervisory and regulatory gaps to enable the Bank of Ghana superintend financial service providers in the microfinance businesses, address bank resolution, ensure financial consumer protection and promotion of innovation and financial inclusion.

The bill is expected to strengthen licensing procedures, consolidate supervision and cross border supervision given the growing importance of conglomerates and foreign banks.

The Banks and Specialized Deposit- Taking Bill is expected to address gaps and inconsistencies in the banking laws and deepen cooperation with regional counterparts to improve the regulation and supervision of foreign banks that are active in the country.

In addition, government needs to provide appropriate mechanisms to minimize financial system stability and address emerging risks anchored on effective supervisory and regulatory measures as well as the introduction of new schemes.

Among the highlights of the bill is to deal with restrictions on lending and investment- which prohibits a bank or specialized deposit-taking institution from granting advances,loans or credit facilities including guarantees against the security of the shares of the bank or specialized deposit-taking institution, the shares of its financial holding company, the shares of any of its subsidiaries or the shares of any of the subsidiaries of its financial holding company.

Additionally, the bill indicates that “a bank, specialized deposit-taking institution or financial holding company whose capital adequacy ratio is less than the ratio prescribed by the BoG is not to take an inter-institutional placement or receive a loan or deposit from the any bank, specialized deposit-taking institution, or financial holding company in the country except with the express written approval of the Bank of Ghana”.

The Act applies to banks, specialized deposit-taking institutions, financial holding companies and affiliates of banks, specialized deposit-taking institutions and financial holding companies.