As an expert in corporate governance with over 20 years in the Ghanaian banking sector, including senior roles at institutions like Ecobank Ghana and Stanbic Bank Ghana, I draw on deep knowledge of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), the Bank of Ghana’s Corporate Governance Directive 2018, and specific post-DDEP guidelines such as BoG Notice No. BG/GOV/SEC/2023/05 on capital restoration. The Domestic Debt Exchange Programme (DDEP), implemented in 2022-2023, involved voluntary exchanges of domestic bonds for new instruments with lower yields and extended maturities, leading to mark-to-market losses and erosion of CET1 capital for banks like Goldbank Plc. This undermined shareholder value protection, a core objective under the stakeholder model of governance, and breached capital adequacy ratios (CAR) under Basel III-adapted rules in Ghana, where minimum CET1 is 10% as per BoG’s Capital Requirements Directive (CRD). Regulatory forbearances, including phased capital restoration periods (e.g., up to 2025 for some banks post-DDEP), allow time for restructuring without immediate license revocation, as seen in the 2017-2019 banking cleanup where banks like UT Bank failed due to governance lapses.

(i) Critically examine the FIVE main corporate governance measures that should be taken by the Board towards its Capital Restoration Programme (CRP). (35 Marks)

The Board must prioritize measures aligned with BoG’s directives to restore CET1 and overall CAR, ensuring compliance, risk mitigation, and ethical leadership. Here are five key measures, critically examined with practical insights:

1. Conduct a Comprehensive Capital Needs Assessment and Stress Testing (7 Marks): The Board should initiate an independent assessment of capital shortfalls post-DDEP, using stress tests under BoG’s Risk-Based Supervision Framework. This involves quantifying losses from bond haircuts (e.g., 20-50% reductions in DDEP exchanges) and projecting future needs via scenarios like interest rate hikes or economic downturns. Critically, this measure prevents underestimation, as seen in the 2019 recapitalization where banks like GN Bank failed stress tests. It aligns with Basel III Pillar 2 (Supervisory Review) and BoG’s CRD, ensuring the CRP is data-driven. Practical example: Access Bank Ghana post-DDEP used external auditors to assess needs, raising GH¢400 million via rights issues.
2. Develop and Approve a Phased Capital Injection Plan (7 Marks): The Board must approve a multi-year plan for capital restoration, leveraging forbearances like BoG’s 3-5 year restoration windows. This includes equity injections, retained earnings buildup, or subordinated debt. Critically, duality of CEO/Chair roles (prohibited under BoG Corporate Governance Directive Section 58) must be avoided to ensure independent oversight. Drawbacks include dilution of shareholder stakes, but benefits include restored confidence, as in GCB Bank’s post-cleanup recapitalization. Reference: BoG Notice BG/GOV/SEC/2023/05 mandates such plans with quarterly monitoring.
3. Strengthen Risk Management and Internal Controls (7 Marks): Integrate CRP into Enterprise-Wide Risk Management (EWRM), institutionalizing controls to prevent further capital erosion, e.g., limiting high-risk investments. The Risk Committee should oversee this, per BoG Directive Section 67. Critically, failures here mirror Enron or Baring Bank’s collapses due to unchecked risks. In Ghana, post-DDEP, banks like Fidelity Bank enhanced liquidity buffers to 30% above minimum, aligning with Liquidity Risk Management Guidelines.
4. Enhance Transparency and Stakeholder Disclosures (7 Marks): Mandate full disclosures in financial reports under IFRS 9 (impairment of financial assets post-DDEP) and BoG’s Pillar 3 requirements. This includes voluntary updates on CRP progress to shareholders and regulators. Critically, this builds trust, preventing systemic failures like the 2017 cleanup, where hidden distress led to bailouts. Example: Stanbic Bank Ghana’s 2023 annual report detailed DDEP impacts and restoration timelines, boosting investor confidence.
5. Monitor and Evaluate CRP Implementation with Ethical Oversight (7 Marks): Establish KPIs like CET1 recovery targets (e.g., back to 13% by 2025) and ethical guidelines to avoid conflicts, per Code of Ethics under BoG Directive. The Audit Committee should conduct quarterly reviews. Critically, this ensures accountability, drawing from global failures like WorldCom, and local cases like Capital Bank’s insider lending. Practical: Ecobank Ghana post-2019 used board sub-committees for ongoing evaluation, achieving full restoration ahead of schedule.

(ii) Examine the governance procedures that should be implemented to co-ordinate the capital restoration programme in Goldbank Plc. (15 Marks)

Coordination requires structured procedures emphasizing board oversight, compliance, and integration with daily operations:

• Establish a Dedicated CRP Steering Committee (3 Marks): Chaired by an independent director, including representatives from risk, finance, and compliance. This ensures cross-functional coordination, per BoG Corporate Governance Directive Section 64 on sub-committees.
• Implement Regular Reporting and Monitoring Mechanisms (3 Marks): Quarterly reports to the full Board and BoG, tracking milestones like capital injections. Use dashboards for real-time oversight, aligning with Basel III and BoG’s BSD returns.
• Integrate Compliance and Audit Functions (3 Marks): Embed internal audits to verify CRP adherence, assessing non-compliance risks under Act 930. Reference: BoG’s Cyber and Information Security Directive for digital tracking tools.
• Stakeholder Engagement Procedures (3 Marks): Regular communications with shareholders (e.g., AGMs) and regulators, including whistleblowing for ethical issues, per Anti-Money Laundering Act 2020 amendments.
• Review and Adaptation Protocols (3 Marks): Annual reviews to adjust for changes like economic recovery post-DDEP, ensuring agility as in Barclays’ global recapitalization strategies adapted locally.

These procedures foster resilience, compliance, and ethical practices, positioning Goldbank for sustainable growth.