The Bank of Ghana (BoG) has reiterated that poor corporate governance was a significant factor contributing to the excessive and irresponsible risks taken by some financial institutions, which ultimately necessitated a comprehensive clean-up exercise in 2017.
This clean-up was essential to secure depositors’ funds and protect the integrity of the financial sector.
To prevent a recurrence of these issues, the BoG introduced several directives aimed at bolstering corporate governance within the financial sector.
In 2018, the Corporate Governance Directive was issued, followed by the Fit and Proper Persons Directive in 2019. These measures were designed to embed sound corporate governance practices in Regulated Financial Institutions (RFIs) and to reinforce the BoG’s gatekeeping role within the sector.
Furthermore, to enhance governance disclosure practices by RFIs, the BoG released the Corporate Governance Disclosure Directive in 2022. This directive outlines regulatory expectations under Pillar III of the Basel Capital Accord, focusing on regulatory and public disclosures.
A statement issued by the BoG on July 11, 2024, reaffirmed that significant shareholders, directors, and key management personnel must always be of good repute and possess the necessary knowledge, skills, and experience to fulfill their duties in accordance with the Fit and Proper Persons Directive, 2019.
The Fit and Proper Standards, as outlined in the directive, consider various criteria to ensure the integrity of individuals in these roles.
This includes assessing whether a person has previously been a director or directly involved in the management of a company or institution whose license was revoked, or which was wound up by a competent court or authority, either within or outside Ghana.
The standards also evaluate if a person has been associated with a financial company that has gone into receivership, insolvency, or involuntary liquidation.
The BoG’s notice emphasized the obligation of RFIs, under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) and the Fit and Proper Persons Directive, 2019, to ensure the ongoing fitness and propriety of significant shareholders, directors, and key management personnel.
Importantly, the BoG reminded the public that individuals directly implicated in the 2017-2019 financial sector clean-up, as well as former directors of failed banks and Specialized Deposit-taking Institutions (SDIs) since the enactment of Act 930, are not eligible to hold key positions under the fit and proper persons criteria.
“Banks, Specialized Deposit-taking Institutions, and the general public are to note the above for their information,” the statement concluded.