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52
Finance
In line with the country’s goal of achieving middle in-
come status by 2015, Ghana has been undergoing a
process of financial sector restructuring and transfor-
mation as an integral part of its Vision 2015 strategy.
Prior to 2003, the Bank of Ghana operated a three-
pillar banking model with all banks licensed as either
development, merchant and commercial banking. In
February 2003, the Bank of Ghana introduced Uni-
versal Banking which allowed the banks to under-
take commercial, development, merchant or invest-
ment banking without requiring separate licences.
This has levelled the playing field, and opened up
the banking system to competition, product innova-
tion and entry.
To operate under the UBBL, existing banks must
have a minimum net worth of ¢70billion (excluding
statutory reserves), and new banks should have a
paid-up capital of ¢70billion. Banks are required to
hold 9% of the cedi and forex deposit base with BOG
on daily basis as primary reserves and 35% of their
deposit base in cedi denominated assets as second-
ary reserves.
The Government of Ghana Index-Linked Bonds
(GGILBs) was introduced in 2001, which as part of
the reserve requirements converted Government
of Ghana (GoG) short-term liabilities into long-term
loans. BoG requires banks to hold 15% of their to-
tal deposits in GGILBs. The GGILB is now being
phased out by the new 2
nd
and 3
rd
year fixed or float-
ing bonds.
Currently, there are 19 banks operating in the formal
banking sector under different banking licenses with
Standard Trust Bank Limited being the latest addition.
Liberalizing entry and encouraging foreign banks
and investors in the financial services industry has
increased competition in the banking industry as
well as the introduction of strong business practices,
technology, products, and risk management sys-
tems.
Since 2002, six banks have entered the Ghana mar-
ket. They are Zenith Bank Limited, United Bank of
Africa, Guaranty Bank Limited, Intercontinental Bank
Limited, Fidelity Bank and Access Banks. Presently
the banking industry has grown into 26 banks.
The current licensing policy of the Bank of Ghana is
to limit entry of foreign banks to truly internationally
active financial institutions.
Overview
Minimum Capital
Requirement
The Bank of Ghana has proposed an increase in the
minimum capital requirements of banks from GH¢7.0
million to between GH¢50-60 million. The proposed
minimum capital requirements for deposit taking non-
banking financial institutions (NBFIs) and finance
houses is an increase from GH¢1 million to between
GH¢5-8 million. Banks and deposit taking NBIFs are
expected to submit capitalization plans by the end
of June 2008. Submission of capitalization plans
would guarantee continued access to the settlement
and primary dealership systems. After December
2008, participation in the settlement system will be
restricted to institutions that have met the capital re-
quirements. To ensure an orderly consolidation, the
banking system would allow for lower tier banks after
December 2008. Banks that do not meet the capital
requirements will belong to the lower tier. Banks and
NBFIs granted licenses or provisional licenses within
the last six months to date are required to meet the
new capital requirements within two years from the
date of operations. New licenses for banks, deposit-
taking NBFIs and Finance Houses would henceforth
only be issued to banks that meet the new minimum
capital requirements. The Bank of Ghana intends to
continue with its current policy of issuing bank licens-
es only to internationally active banks.
National Switch
The Bank of Ghana has established a National
Switch (E-ZWICH) to allow the establishment of a
common platform for all payments transactions in
the country. This would result in the integration of all
existing bank switches and allow banks that do not
have switches (e.g. ARB Apex Bank) to join the com-
mon switch at significantly reduced costs. It would
also allow the interoperability of all ATMs and the
settlement of payments transactions by customers
of different banks at Points of Sale (POS).
The national Switch has the capability to deal with
transactions that take place online (in places with
telecommunications) and offline (i.e. where telecom-
munications are not present, e.g. in some rural ar-
eas). This is a major departure from existing systems
and has been made possible by the Universal Elec-
tronic Payments (UEPS) technology.
Bills of Exchange Act
Ghana is essentially a cash-based economy with
embedded high transaction costs. In recognition of