BoG prescribes new banking rules

The Central Bank has given new directives as to how to run the country’s banks and specialised deposit-taking institutions ahead of the recapitalization move.

The Banks and Specialised Deposit-Taking Institutions Corporate Governance directive 2018 is in accordance with Section 92(1) of the Banks & Specialised Deposit Taking Institutions Law (Act 930, 2016).

According to the Central bank, the directive applies to all regulated financial institutions licensed or registered under Act 930 and any other entity regulated by the Bank of Ghana under any other enactment.

Approval

Under Section 60 of Act 930, a regulated financial institution shall seek prior written approval of BoG before it appoints a Chief Executive Officer (CEO) or a Deputy Chief Executive Officer of the bank or specialised deposit-taking institution, each of whom shall be ordinarily resident in the country.

“A regulated financial institution shall not appoint a key management personnel without the prior written approval of the Bank of Ghana. The Bank of Ghana shall not grant approval for a person to be appointed as a Chief Executive or Deputy Chief Executive of a regulated financial institution if in the opinion of the Bank of Ghana that person is not fit and proper to be appointed in that capacity.

Removal

It said “where the Bank of Ghana considers that director or key management personnel is not a fit and proper person to act in that capacity, the Bank of Ghana shall direct the removal of such person (s) from the board of the regulated financial institution one month after hearing representations made by that regulated financial institution.”

Annual certification

The new guidelines indicate also that annually, within 120 days of the end of each financial year, the board shall provide certification to the BoG as to the compliance of the regulated financial institution or otherwise in accordance with the new directive.

Additionally, the certification should state that the board has independently assessed and documented whether the corporate governance process of the regulated financial institution is effective and has successfully achieved its objectives or otherwise.

Size

A board shall have at least five members, including the Chairperson and a maximum of 13 members, the majority of whom must be independent and non-executive and ordinarily resident in Ghana

Related party transactions

“The board shall ensure that transactions with related parties (including internal group transactions) are reviewed to assess risk and are subject to appropriate restrictions (e.g., by requiring that such transactions be conducted on non-preferential terms/basis) and applicable legislation and other requirements such as those prescribed under Sections 67 to 70 of Act 930 regarding exposure limits for loans to related parties and staff.”

Plan for succession

“The board shall select, subject to approval by the Bank of Ghana where applicable, and replace, where necessary, key management personnel and put in place an appropriate plan for succession. The succession plan shall focus on developing human resources to enable the regulated financial institution to retain a pool of qualified candidates, who are ready to compete for key 10 positions and areas when they become vacant to ensure effective continuity of the banking business.”

Separation of powers

It said there shall be a clear division of responsibilities at the top hierarchy of the regulated financial institution.

The positions of the Board Chair and the Managing Director/Chief Executive Officer shall be separate.

“No one individual shall have unfettered powers of decision in any regulated financial institution and therefore no one person shall combine the two (2) top positions in any regulated financial institution at the same time. The two (2) top positions of Board Chair and Managing Director (MD)/CEO in a regulated financial institution shall not simultaneously be occupied by foreigners. One of these positions shall be occupied by a Ghanaian national.

“No two (2) related persons shall occupy the positions of Chair and MD/CEO or Executive Director and Chairman in a regulated financial institution.”

Disclosure and transparency

“A regulated financial institution shall submit a list of its significant shareholders, directors and key management personnel as at 31st of December of every year to the Bank of Ghana by 15th January of the following year. The governance of the bank shall also be adequately transparent to its shareholders, depositors, other relevant stakeholders and shall be disclosed in its annual report. The disclosure shall include, but not be limited to, material information on the organizational and governance structures and policies, (in particular the content of any corporate governance code or policy and the process by which it is implemented), major share ownership and voting rights and related parties transactions of the regulated financial institution.”

Cooling-off period

On this, it said a person shall not be appointed as a director of a regulated financial institution if that person was a director of a regulated financial institution and less than one (1) year has passed since that person ceased to serve as a director of that institution unless in the opinion of the Bank of Ghana, special circumstances require that the person be appointed as a director of that regulated financial institution.

“Former Bank of Ghana officers or directors/senior executives shall not be eligible for appointment as a director of a regulated financial institution until after a period of two (2) years have passed following the expiration or termination of contract of employment or service of such person as an officer or director/senior executive of the Bank. b) A practicing audit professional or partner who is rendering services or had rendered auditing services in the banking industry shall not be appointed as a director of a bank until one (1) year has elapsed since last engagement with any regulated financial institution by that person.”