Chief executives of banks are predicting that legislations and regulations will be part of the factors influencing the banking industry for the next five years but they want the regulator, the Bank of Ghana, to bear part of the costs for any such interventions.
This is because for most of the time, legislations and regulations that impact the industry come at no cost to the regulator, while the banks are made to bear the costly impact.
They cited the specific example of the recent increase in primary reserves from nine per cent of deposits to 11 per cent, which came at no cost to the regulator, a situation the bankers describe as “free money” for the Bank of Ghana.
The CEOs’ views were contained in the 2014 Ghana Banking Survey by accounting firm PwC on the theme: “The Future of Banking in Ghana, which in turn charges banks punitive interest rates when they were compelled to borrow overnight from the central bank.”
The banking captains also said future banking legislations and regulations should be designed to have a long-term focus on overall industry growth, saying if that was achieved there would be minimal need for panic interventions focused on achieving short-term corrections to market conditions.
The country’s banking industry has undergone tremendous transformation since 2004 with the passage of the Banking Act, 2004 (Act 673), which provided for universal banking.
Since then, the number of banks has increased exponentially from about 16 banks to the current 28 universal banks, with a couple of licences in the offing.
There are also 137 rural and community banks and 58 non-banking financial institutions, including finance house, savings and loans, leasing and mortgage firms.
A couple of years ago, the BoG asked universal banks to increase their stated capital to the cedi equivalent of US$60 million. Foreign banks had up to the end of 2012 to meet the requirement, with local or indigenous banks having up to the end of last year to meet it.
The survey, interestingly, reports that players in the industry feel they are prepared and well positioned to embrace such regulations.
On average, about 77 per cent of bank executives who participated in the survey felt that the industry was sufficiently prepared for the future of regulation in banking.
However, overall proper compliance mean that banks need to invest in systems, process change, governance, staff training and so on within a fairly short time.
Whether prepared or unprepared – some banks executives expressed the view that in the future they expect regulation to be more consultative during the development and design stages so that the views and contributions of industry players would be properly taken into consideration.
Banking and technology
Prominent in the survey findings is the role technology will play in influencing banking transactions going forward.
More than 60 per cent of the CEOs ranked technology as the third most influential factor that would drive the industry in the next five years.
Driving technology will include electronic banking services, mobile banking services; point of sale (POS) systems; system and data security as well as availability of cheap data-enabled handsets.
Some chief executives that the GRAPHIC BUSINESS interacted with after the launch of the report welcomed the findings, and that some had even been an eye-opener.
“The survey is great, especially the drivers to banking in the future is just spot-on. Those are the topical issues that international banks are grappling with and they must be the concern for local banks as well,” said Mr Alhassan Andani, the Managing Director of Stanbic Bank Ghana Ltd, whose bank moved to occupy the third position as holding the largest industry share of operating assets, deposits as well as loans.
“For us, technology is the way to go. We have to be like the apple-style platform which enables us to do what customers want and not what we want,” Mr Andani said.
Mr Felix Nyarko-Pong, CEO of UniBank, said the effects of technology driving banking was already afoot with the advent of mobile banking transforming the way banking is done, even though its relevance remained.
“For us in Ghana, the future of the industry also hinges on how well the macroeconomics is managed. We cannot be bigger than the economy in which we reside and as much as we play our role in trying to help kick-start it; it will have to be a joint effort not only by industry but also driven largely by government in terms of best practice management of the economy,” Mr Nyarko-Pong said.
The Managing Director of Standard Chartered Bank Ghana, Mr Kweku Bedu-Addo, although agreed with the quartile analyses of the banking industry, stressed efficiency and the quality of each benchmark and not headlines numbers.
“We need to also consider what goes on behind the headline numbers; capital, liquidity and the quality of the transactions because they matter most,” Mr Bedu Addo said.
The managing director of Stanchart, which traded its second position on advances to fourth position with 7.2 per cent market share, however, said findings that changed in demography were indicative of how the industry had taken that for granted.