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IN exercise of the powers
conferred on the Secretary
responsible for Finance by
sections 3 (4) and 40 of the
Banking Act, 1970 (Act 339) and
after consultation with the Bank
of Ghana these Regulations are
made this 23rd day of December,
1988.
Regulation 1—Minimum Capital for
Licence.
No person shall qualify to hold a
licence unless—
(a) in the case of a Ghanaian
banking business, the business
maintains a minimum paid up
capital of not less than two
hundred million cedis; or
(b) in the case of a foreign
banking business the business
maintains a minimum paid up
capital of five hundred million
cedis of which not less than three
hundred million cedis shall be
brought into Ghana in convertible
currency; or
(c) in the case of any other
banking business, the bank shall
maintain such minimum capital as
the Bank of Ghana may determine .
Regulation 2—Capital Adequacy of
Banks.
(1) Every bank shall at all times
while in operation maintain a
minimum capital adequacy ratio of
six per cent; except that a higher
capital adequacy ratio may be
fixed—
(a) by the Bank of Ghana with
respect to any particular bank; or
(b) generally with respect to the
banks by the Bank of Ghana with
the prior approval of the
Secretary;
and for such periods as the Bank
may determine.
(2) The capital adequacy ratio
shall be measured as a percentage
of the capital base of the bank to
its adjusted assets base in
accordance with the provisions of
the First Schedule to these
Regulations.
(3) Any bank which fails to
maintain the level of capital
adequacy provided for or
determined under these Regulations
shall be liable to pay to the Bank
of Ghana on each day on which the
deficiency continues as penalty
one half per mille of the
difference between the capital
adequacy that the bank should have
maintained and the capital
adequacy actually maintained by
the bank, and unless such
deficiency is remedied within 90
days after it has occurred the
Bank of Ghana may prohibit the
bank concerned from granting loans
or credits or from making
investments or accepting deposits.
Regulation 3—Payment of Dividends.
(1) No bank shall declare or pay
any dividends on its shares in any
one year if the level of capital
adequacy of the bank is less than
prescribed under these
Regulations.
(2) Where a bank declares or pays
any dividend in contravention of
subregulation (1) of this
Regulation every director of the
bank shall be liable to pay to the
Bank of Ghana a penalty of not
less than one hundred thousand
cedis.
(3) No bank shall pay any dividend
on its shares until it has
completely recovered all its
capitalised expenditure.
(4) For the purposes of
sub-regulation (3) of this
Regulation "Capitalised
Expenditure" includes preliminary
expenses, share selling
commission, brokerage losses
incurred by the bank and any other
item of expenditure not
represented by tangible assets.
(5) No director shall be liable to
pay a penalty under sub-regulation
(2) of this Regulation if he
proves that the contravention was
committed without his consent or
connivance by a person other than
himself and that he exercised all
due diligence to prevent the
commission of the contravention
having regard to all the
circumstances.
Regulation 4—Credit Control.
(1) No bank shall grant any
advance, credit or undertake any
financial guarantee or indemnity
to or in respect of any one person
or group of persons or carry out
any other transactions for any one
person or group of persons which
constitutes in the aggregate a
liability to the bank, amounting
to more than twenty five per cent
of the net-worth of the bank:
Provided that in the case of an
unsecured advance, credit,
financial guarantee or indemnity,
the bank shall not grant any
advance credit or undertake any
such guarantee or indemnity
amounting in the aggregate to more
than ten per cent of the net-worth
of the bank.
(2) Subregulation (1) shall not
apply to transactions between
banks.
Regulation 5—Auditor’s Report.
(1) For the purposes of effective
supervision of banks by the Bank,
the auditor of a bank shall at
least once every year submit to
the bank a statutory audit report
and a long form audit report.
(2) The bank shall submit to the
Bank of Ghana, within such time as
the Bank of Ghana shall determine,
copies of the auditor's reports
submitted to the bank under
subregulation (1).
(3) The auditor shall state in his
statutory report whether or not—
(a) the accounts give a true and
fair view of the state of affairs
of the bank and its results for
the period under review;
(b) he was able to obtain all the
information and explanation
required by him for the efficient
performance of his duties;
(c) the bank's transactions are
within the powers of the bank; and
(d) the bank has complied with the
relevant provisions of the Banking
Act, 1970 (Act 339) and any
regulations for the time being in
force
(4) The auditor shall submit a
long form audit report on the
accounts and the affairs of the
bank generally, and provide his
comments in respect of the matters
specified in the Second Schedule
to these Regulations.
(5) The Bank of Ghana may from
time to time by notice amend the
Second Schedule to these
Regulations.
(6) The Bank of Ghana may at any
time at the expense of the bank—
(a) require the auditor to
undertake such further audit or
provide such additional
information or both as the Bank
may consider necessary;
(b) engage an auditor to audit
either in whole or part the
accounts of the bank.
Regulation 6—Interpretation.
In these Regulations unless the
context otherwise requires—
"Bank" means the Bank of Ghana;
"bank" has the meaning assigned to
it under section 47 of the Banking
Act, 1970 (Act 339).
SCHEDULES
FIRST SCHEDULE
(Regulation 2)
CAPITAL ADEQUACY
1. Capital Base.
(i)
For the purposes of subregulation
(2) of Regulation 2 of these
Regulations, capital base shall
comprise primary capital and
secondary capital as indicated
hereunder;
(ii) The sum of primary and
secondary capital as indicated in
paragraph 2 shall not be less than
6 per cent of the adjusted asset
base subject to the total of
secondary capital being limited to
a maximum of 50 per cent of the
total primary capital, and not
more than one-half of the total of
secondary capital shall be in
subordinated term debt as defined
in paragraph 2 (c).
(iii) Deductions from—
(a) primary capital shall be
goodwill, other intangible assets,
fixed assets, revaluation
surpluses and anticipated losses
not yet provided for;
(b) total (primary plus secondary)
capital shall be—
(i)
investments in unconsolidated
subsidiaries and associates;
(ii) investments in the capital
of other banks and financial
institutions;
(iii) connected lending of a
capital nature.
2. Definitions.
(a) "Adjusted Asset Base" means
total assets plus off-balance
sheet items less—
(i)
cash;
(ii) balances with Bank of Ghana;
(iii) Ghana Government treasury
bills;
(iv) Ghana Government stocks;
(v) overnight money with Discount
Houses in Ghana;
(vi) investments in unconsolidated
subsidaries and associates;
(vii) investments in the capital
of other banks and financial
institutions;
(viii) connected lending of a
capital nature;
(ix) goodwill and other
intangibles;
(x) fixed assets (inclusive of
revaluation surpluses relating
thereto);
(xi) anticipated losses not yet
provided for.
(b) “Primary capital” includes
permanent shareholders' equity
(issued and fully paid ordinary
shares), disclosed reserves
(created or increased by
appropriation of retained earnings
or other surplus profits and other
distributable and legal reserves);
(c) "Secondary capital" includes—
(i)
hybrid (debt/equity) capital
instruments which are—
(a) unsecured, subordinated and
fully paid up;
(b) not redeemable at the
initiative of the holder or
without the prior consent of the
supervisory authority;
(c) available to absorb losses
without the bank being obliged to
cease trading; and
(ii) subordinated term debt, which
includes conventional unsecured
subordinated debt, capital
instruments with a fixed term to
maturity and limited life
redeemable preference shares in
excess of five years and which are
not normally available to absorb
the losses of a bank which
continues trading.
SECOND SCHEDULE
(Regulation 5)
MATTERS TO BE INCLUDED IN THE LONG
FORM
AUDIT REPORT
1. Accounting, management
information and internal controls—
(a) the accuracy and reliability
of the accounting system in
general;
(b) the effectiveness of the
management information system;
(c) the effectiveness and
enforcement of internal controls;
(d) the accuracy and reliability
of completion of the prudential
returns to Banking Supervision
Department.
2. Comments on the financial
accounts—
(a) the financial performance of
the bank during the period under
review including—
(i)
the reliability and composition of
reported earnings;
(ii) the breakdown and analysis of
operating costs;
(iii) the liquidity and capital
adequacy ratios;
(b) the accounting policies and
valuation criteria applied in the
preparation of the accounts;
(c) the adequacy of provisions
made—
(i)
against the advances portfolio,
investments and other asset
accounts;
(ii) against off-balance sheet
items;
(iii) for credits, accruals and
other liabilities.
(d) re-classifications and other
adjustments made by the auditors
to the accounts originally
submitted for audit;
(e) details of any adjustments not
made to the accounts because they
are not considered to be material;
(f) details of any areas where the
Manual of Accounting for banks
issued by the Bank of Ghana has
not been complied with;
(g) the full accounts of the bank
for the period under review.
3. Audit Work
(a) the adequacy of work
undertaken by the bank's internal
audit department. The extent to
which the external auditors have
relied on the internal audit
department's work when performing
their own duties;
(b) the amount of audit work
undertaken in particular areas
including scope of the tests,
sampling criteria, coverage
achieved, extended work,
confirmation exercises with third
parties;
(c) the results of audit work
undertaken;
(d) the effectiveness and
timeliness of remedial action
taken following the previous
year's management letter and/or
long form audit report from the
external auditors;
(e) details of any areas where the
Manual of Auditing for External
Auditors issued by the Bank of
Ghana has not been complied with.
DR. KWESI BOTCHWEY
P.N.D.C. Secretary for Finance and
Economic Planning
Date of Gazette Notification: 30th
December, 1988. |
