Financial markets (e.g., GSE, money markets) and institutions (e.g., banks, insurance) are vital for resource allocation, growth, and stability in Ghana, handling ~70% of GDP via credit (2024 data). Regulation, per BoG and SEC, prevents failures like 2017 collapses.

Rationale for Regulation

• Systemic Stability: Interconnectedness means one failure (e.g., UT Bank insolvency) can cause contagion. Regulation via Act 930 enforces capital adequacy (e.g., 10% CAR per CRD), preventing crises. Post-DDEP (2022-2024), BoG’s recap guidelines (BG/GOV/SEC/2023/05) restored buffers.
• Consumer Protection: Asymmetric information leads to exploitation (e.g., high fees). Directives like Corporate Governance 2018 ensure transparency; Cyber Security Directive 2020 protects digital banking data amid fintech rise (Act 987).
• Market Integrity and Efficiency: Prevents manipulation (e.g., insider trading on GSE per SEC rules). Promotes fair pricing, liquidity; BoG oversees forex to curb speculation, stabilizing cedi.
• Prudential Oversight: Manages risks (credit, operational) via Basel II/III. E.g., Liquidity Guidelines mandate ratios, averting runs as in 2018 panics.
• Economic Policy Support: Aligns with monetary/fiscal goals (e.g., inflation targeting). Sustainable banking principles (BoG 2020s) incorporate ESG, addressing climate risks in agriculture lending.
• Preventing Moral Hazard: Deposit insurance (Ghana Deposit Protection Act) protects savers but requires oversight to avoid risky behavior.

In practice, 2017-2019 cleanup revoked 9 bank licenses for governance lapses, enhancing trust. Regulation balances innovation (e.g., fintech) with safety for resilient growth.