A partnership between the Bank of Ghana (BoG) and the International Finance Corporation (IFC) to strengthen corporate governance practices within Ghana’s financial sector has been launched with the signing of a co-operation agreement in Accra.

The agreement falls within IFC’s initiative dubbed: ‘African Corporate Governance (AfCG) Program’ which forms part of IFC’s broader governance agenda for Africa and aimed at improving corporate governance practices across markets within the Africa sub-region and at charting a course towards building a stronger governance framework for the banking industry in Ghana.

AfCG Program is an initiative which is being implemented by IFC and funded by the State Secretariat for Economic Affairs (SECO) of Switzerland.

In his remarks at the opening of a seminar, which formed part of activities marking the launch of the BoG/IFC partnership, Dr Johnson Asiamah, Second Deputy Governor, BoG, identified poor corporate governance practices, ranging from weak board oversight, weak internal and external audit controls and poor risk-taking judgment as some of the main causes of global corporate scandals and failures.

Dr Asiamah said the fall of global financial institutions like Lehman Brothers, Northern Rock and the insurer brought into sharp focus the need for banks to strengthen their corporate governance practices and for Regulators to ensure that sound corporate governance principles were thoroughly embedded in the operations of banks.

He said sound corporate governance practice was critical to improving economic efficiency and growth of the banking system as it served as a deterrent to mismanagement and infused discipline in the decision-making process at the Board level, adding that adherence to the principles of good corporate governance fostered investor confidence and attracted domestic as well as foreign investors.

He said the failure of banks affected not only its own stakeholders, but might also have an adverse systemic impact on the stability of other banks and the economy as a whole.

Furthermore, Dr Asiamah said, banks needed sound corporate governance practices in order to build public trust and confidence as well as credibility in their operations in order to promote the safety and soundness of the entire banking system. “Without sound governance structures, banks stand the chance of eroding public trust and ultimately put shareholders’ investments and depositors’ funds at risk,” he added.

He disclosed that recognising the centrality of risk management and compliance systems in corporate governance frameworks, the Bank of Ghana was reviewing its Risk Management Guidelines for adoption.

He said to underscore the importance of corporate governance in the industry, the new Banks and Specialized Deposit-taking Institutions (SDI) Bill, which had been passed by Parliament, had explicit provisions on corporate governance, which suggested a shift from a principle-based approach to that of rule-based and that BoG would adopt a combination of the two approaches in developing a sound and effective corporate governance framework for the industry.

He disclosed that that the College of Supervisors of the West African Monetary Zone (WAMZ) was in the process of developing a common corporate governance framework for the WAMZ while a number of guidelines and directives had been prepared by the BoG to further strengthen and promote sound governance in the industry.

The guidelines, he said, included a revised Guide for Reporting Institutions; Guidelines for Credit Classification and Provisioning; Guide for the Publication of Accounts; Internal Audit Guideline and; Outsourcing Guideline, among others.

Dr Asiamah said the guidelines were necessary to ensure the proper conduct of banks and to enhance the safety and soundness of the banking system, adding that sound corporate governance principles were essential to enhancing banking stability, which was required to drive financial stability.

He, therefore, urged the National Banking College to design capacity-building programmes for Directors of banks so as to enhance the operations of Boards because Board excellence would become an illusion for failure to recognize the role and duties of Directors of banks.

He said as its contribution to significantly enriching the quality of Board deliberations, BoG and the IFC, had lined-up a series of Quarterly training programmes for the Boards of banks, board sub-committees and internal auditors of banks, among others.

Welcoming participants to the signing of the BoG/IFC partnership agreement and the seminar, Mr Joseph Akwasi Kuma, Senior Country Officer, IFC, explained that the ACG program was one of the key activities to be used by IFC to provide technical assistance and to strengthen competitiveness of the private sector.

Mr Kuma noted that corporate governance was as pre-requisite to improved performance, job creation sustainable private sector development and economic growth, adding that successful businesses could only remain efficient and profitable through the institution of policies and control mechanisms such as well thought-out succession planning.

He disclosed that in its efforts to end extreme poverty in Ghana, IFC had invested US$ 1.6 billion in Ghana and commended SECO for funding the BoG/IFC partnership.

The Seminar was one of the many interventions under the AfCG program, an initiative by the IFC and SECO, intended to strengthen corporate governance practices within Ghana.

Topics discussed at the seminar were ‘Board Excellence and Leadership’ and ‘the Business case of Corporate Governance- the evolution of Corporate Governance in Ghana.’

Source: ISD (G.D. Zaney)