- 20 Marks
Question
State and discuss any five salient differences between the Bank of Ghana and any other Universal bank.
(20 marks)
Answer
- With my background in treasury and regulatory compliance at institutions like GCB Bank, the Bank of Ghana (BoG) operates as the central bank under the Bank of Ghana Act, 2002 (Act 612) as amended, distinct from universal banks licensed under Act 930. This distinction was pivotal during the 2017-2019 cleanup, where BoG revoked licenses of undercapitalized banks. Below, five salient differences, discussed with practical examples:
- Ownership and Mandate: BoG is wholly government-owned with a mandate for monetary policy, stability, and regulation, per Act 612. Universal banks like Ecobank Ghana are privately or publicly owned, focusing on profit-driven services. BoG’s non-profit role enabled interventions like the DDEP (2022-2024), while universal banks prioritize shareholder returns.
- Regulatory Role: BoG supervises and licenses all banks, issuing directives like the Liquidity Risk Management Guidelines. Universal banks comply but don’t regulate others. For instance, BoG enforced recapitalization via Notice No. BG/GOV/SEC/2023/05, leading to collapses like UT Bank, whereas universal banks like Stanbic focus on internal compliance.
- Lending Activities: BoG lends to government and banks via repo facilities but not directly to public, maintaining reserve requirements. Universal banks offer retail/corporate loans, as in Access Bank’s SME financing. This separation prevents conflicts, ensuring BoG’s impartiality in crises like the 2019 cleanup.
- Profit Orientation and Reserves: BoG transfers surpluses to government, holding national reserves without dividends. Universal banks distribute profits to shareholders, per Corporate Governance Directive 2018. Post-DDEP, BoG managed forex reserves for stability, while universal banks rebuilt capital for profitability.
- Risk Exposure and Operations: BoG faces systemic risks, managing inflation and payments via GhIPSS, without retail branches. Universal banks handle credit/market risks in daily operations, with widespread networks. Ethical standards under BoG’s sustainable principles guide both, but BoG’s oversight ensures sector resilience.
- Tags: Bank of Ghana, Central Bank, commercial banks, Differences, Regulation, universal banks
- Level: Level 1
- Topic: THE COMMERCIAL BANKS
- Series: APR 2023
- Uploader: Samuel Duah