Banking and Financial

Services Law in Ghana

Rowland ATTA-KESSON, March 2018

 • Definitions
• Common law definition of bank
• Statute law definition of bank
• Bank and customer relationship
Contents • Broad constitutional and statutory
framework
• General principles of bank regulation
 • JUDICIAL DEFINITION
• Unlike some common law countries, which have both
statutory and judicial definitions of a “bank” there is only
statutory definition of the term under Ghanaian law.
• In the English case of United Dominions Trust Ltd.
Common v. Kirkwood where the court was to decide whether
or not the UDT was an unlicensed money lender,
Law Lord Denning defined a bank in terms of possession
the ff characteristics:
Definition of
• Accepting money and collecting cheques for customer’s
Bank credit
• Honouring cheques and debiting customer’s account; and
• Keeping accounts for customers in the bank’s books in
order to enter the credits of the customer.
 • In the Australian HC case of Commissioners of the
State Savings Bank of Victoria v. Permevan, Wrigth
and Co Ltd, Isaacs J defined a bank by outlining its
essential characteristics as
• “the collection of money by receiving deposits upon loan,
Common repayable when and as expressly or impliedly agreed upon,
and the utilization of the money so collected by lending it
Law again in such sums as are required. These are the essential
functions of a bank as an instrument of society…assisting
Definition of commercial, industrial or other enterprise or ventures. The
methods by which the functions of a bank are effected-as
Bank by current account, deposit account at calll, fixed deposit
account, orders, cheques, secured loans, discounting bills,
notes issue, letters of credit, telegraphic transfers, and any
other modes that may be developed by the necessity of
business-are merely incidental auxiliary circumstances,
any of which may or may not exist in any particular case”
 • The US Supreme Court defined a bank in US v
Philadelphia National Bank as the characteristic feature
of commercial bank is that, of all financial institutions,
• “they are permitted by law to accept deposit”
• The court then went on to list the following activities as
the principal banking products:
Common • (1)unsecured personal and business loan; (2) mortgage loans; (3)
loans secured by securities or accounts receivable; (4) automobile
Law installment and consumer goods installment loans; (5) tuition
financing; (6)bank credit cards; (7)revolving credit funds;

Definition of (8)acceptance of demand deposits from individuals, corporations,

governmental agencies and other banks; (9)acceptance of time
and savings deposits; (10) estate and trust planning and trustees
Bank services; (11) lock boxes and safety deposit boxes; (12)account
reconciliation services, (13) foreign department services; (14)
correspondent services; and (15) investment advice.
• The court however noted that many other institutions in
addition to banks perform many of these services and thus
are direct competitors with banks
 • In 1873 case of Oulton v. German’s Savings and Loans
Society, a US court described a bank as term which
implies a place for the deposit of money.
• The court added that originally the business of banking
consisted only in receiving deposits such as bullion, plate
and the like, for safe keeping until the depositor draws it
Common out for use.
• But the business in the progress of events, was extended,
Law and
Definition of • bankers assumed the responsibility to discount bills and notes
and
Bank • to loan money upon mortgage, pawn, or other security and
• at a still later period to issue notes of their own intended as a
circulating currency and medium of exchange instead of gold
and silver.
• Modern bankers frequently exercise any two or even all
three of those functions
 • From the judicial definitions or descriptions of a ‘bank’
as noted above, the following propositions may be made
• First, judicial authorities define a ‘bank’ in terms of its
characteristics particularly the activities it performs
• Second, a ‘bank’ is a dynamic concept as the definitions show
that the functions of a bank keep changing by way of expansion
from time to time
Common • Third, given the dynamic nature of a ‘bank’, it may be
concluded without doubt that for an indeterminable period of
Law time the categories of the functions and products of a bank will
never be closed as some modern products are under scrutiny.
Definition of • Fourth, the definitions do not stress the importance of licensing
Bank as a key feature of a bank, probably because in contemporary
times, it is taken for granted that banking was part of the
ordinary way of life of capitalist societies from where modern
banking emerged.
• Fifth, for centuries, the judicial definitions have served as the
classical definitions of a bank until legislative interventions were
made within the last four decades or so.
 • The statutory literature on a ‘bank’ in Europe shows
that there is no uniform way of defining the term.
• According to one writer, there are three approaches to
define a bank
• One approach states that anybody recognized by a
governmental authority is a bank
European • Another approach lists the activities which banking
encompasses
Law • The third defines a bank in terms of specified generalized
Definition of characteristics.
• What is common to all these approaches is that a bank
Bank is associated with an institution that takes deposits,
provides credit and makes payment on behalf of
customers.
• That is the way Article 1 of the Credit Institution
Directive of the European Union defines a bank.
 • Section 23(1) of the Banks and Specialised Deposit-Taking
Institutions Act, 2016 (Act 930) outrightly proscribes the use of the
word ‘bank’.
• Thus, with some exceptions including a company holding a
banking licence under Act 930, no other person is permitted by
law to hold itself out as a bank or use the word ‘bank’ or any of its
derivatives in any language, or use any word that sounds like
Ghanaian ‘bank’ in the description or title under which that person is
carrying on financial services business in Ghana, or make a
Statute Law representation to this effect in any billboard, letter, paper, notice,
advertisement or in any other manner.
Definition of • Another exception relating to the use of the word ‘bank' is an
Bank association of banks or an association of employees of a bank
formed for the promotion of mutual interests of its members.
(Section 23(2) of Act 930).
• Similarly, a specialised deposit-taking institution licensed as a
rural or community bank may use the term “rural bank or
“community bank”. A contravention of this rule is an offence and
attracts an administrative penalty of 1500 penalty units. (Section
23(7) of Act 930).
 • Now, section 156 of Act 930 defines a ‘bank’ as a body
corporate which engages in the deposit taking business and
issued with a banking licence in accordance with the Banks
and Specialized Deposit-Taking Institutions Act, 2016 (Act
930).
• What is a specialised deposit-taking institution or SDTI?
Section 156 of Act 930 defines it as a body corporate which
Ghanaian engages in the deposit taking business and it issued with a
licence to engage in the deposit-taking business in accordance
Statute Law with Act 930.
Definition of • And what is financial holding company? Again, the said section
156 also defines a financial holding company as a company that
Bank controls a bank or a specialized deposit-taking institution
which is subject to registration requirements under Act 930.
• On what is an affiliate of a company, the said section 156
defines an affiliate of a company as (a) a body corporate of
which the company is a subsidiary; (b) a subsidiary of the
company, or (c) a body corporate that is under a common
control with the company.
 • A bank and an SDTI are very similar under
Ghanaian law. The difference between the two lies in
the particular licence each holds. Thus, a bank is first
a deposit-taking body corporate which is registered
with a banking licence under Act 930. On the other
Ghanaian hand, an SDTI is only registered under Act 930 with
a deposit-taking institution licence. One can thus say
Statute Law that all banks in Ghana are deposit-taking
Definition of institutions but not all deposit-taking institutions in
Ghana are banks.
Bank • This definition means that the Act 930 has a very
wide scope of coverage. This equally extend to cover
all those companies which have some form of control
over a bank and an SDTI, holding company of a
bank or of an SDTI, or their respective subsidiaries.
 • Another difference between a bank and an SDTI is in the area
of permitted activities. Indeed, under Act 930, a bank and an
SDTI are the same in terms of their respective permitted
activities.
• In this wise, common permissible activities of banks and
specialised deposit-taking institutions which are contained in
Section 18(1) of Act 930 are:
Ghanaian • (1) acceptance of deposits and other repayable funds from the public;
(2) lending; (3) financial leasing; (4) investment in financial securities;
Statute Law (5) money transmission services; (6) issuing and administering of means
of payments including credit cards, travelers cheques, bankers’ drafts
Definition of and electronic money; (7) guarantees and commitments; (8) trading for
own account or for account of customers in (i) money market
Bank instruments (ii) foreign exchange, or (iii) transferable securities; (9)
participation in securities issues and provision of services related to
those issues; (10) advice to undertakings on capital structure,
acquisition and merger of undertaking; (11) portfolio management and
advice; (12) keeping and administration of securities; (13) credit
reference services– safe custody of valuables; (14) electronic banking;
(15) payment and collection services; (16) bancassurance; (17) non
interest banking services; and (18) any other services that the Bank of
Ghana may determine
 • Another notable difference between a bank and an SDTI is that an
SDTI is prohibited from engaging in the trading of foreign
exchange or offer services denominated in a foreign currency.
(Section 18(2) of Act 930).
• By way of similarity, both a bank and an SDTI are required to
complied with other laws like the Securities Industry Act, 1993
(PNDCL 333), Foreign Exchange Act, 2006 (Act 723), the Credit
Ghanaian Reporting Act, 2006 (Act 726), the Insurance Act, 2006 (Act 724) or
any other relevant enactment. (Section 18(3) of Act 930).
Statute Law • The scope of the Act 930 is really expansive indeed and it is
designed to covered every conceivable deposit-taking busines in
Definition of Ghana. But the Act does not understandably cover credit unions
licensed and supervised under the NBFI Act, 2008 (Act 774).
Bank • According to section 156 of Act 930, a credit union is a body
corporate established as a co-operative and not for profit but to
provide savings, credit and other financial services to members of
that body corporate based on a common bond and linkage of
association.
• Thus Act 930 targets only for-profit business organisations in the
financial service industry.
Bank and
Customer
 • The relationship between banks and their customers has
been controlled essentially by principles enunciate by
English common law.
• Recent legislative interventions, arising from the needs of
modern banking, have expanded the role of statutory law
in defining the legal framework of the banker-customer
relationship
• Thus the relationship is controlled by statute law and case
BANK law.
• We discuss the ff:
CUSTOMERS • How the law defines a bank customer and highlights
the types of banks customers
• How the law limits the scope of services banks offer to
their customers
• How the law views the nature of the relationship
created by law in respect of each service the bank
provides for its customers; and
15
• How the law confers rights and imposes obligations on
the customer under each service provided by the bank.
 • Neither the banking statutes nor any other law in Ghana has
defined a ‘bank customer’
• The courts and banks in Ghana rely on English case law to
determine who is a bank customer.
• It is trite English law that a bank customer is a person who
maintains an account with a bank.
• The account could be current, savings, or a fixed or term
deposit account or credit card account, etc
Who is a • In Great Western Railway Co. Ltd. v London and County
Banking Co.
bank • where a bank for over a period cashed cheques for a
customer? rate collector who had no account with the bank
• The English CA held the man could not be considered as
a customer as he maintained no account with the bank.
• This principle was followed by the Ghana’s CA in Bank of
West Africa Ltd v Appenteng
• When it held that an action against the bank brought by
one of the defendants could not be maintained because
he did not have an account with the bank.
• The significance of creating a relationship based
on account opening is that the bank agrees to
“execute certain monetary transactions of the
customer by:
• Honouring its cheques,
• Making periodic payments authorized by the
customer,
• Collecting payments due to him
• Later judicial authorities and academics have
described the bank customer as a person who
has a special contractual relationship with a
bank whereby the bank provides certain bank
services on the basis of the special general
contract and specific contract.
• This theory was first enunciated in the English case of
Joachimson v. Swiss Bank Corporation. The Court held
that the contract is an implied one which exists between
the parties and creates a complex contractual
relationship, consisting of reciprocal rights and duties
founded on the practices and usages prevailing among
bankers.
• “The relationship consists of a general contract which
is basic to all transaction, together with special
contracts which arise only as they are brought into
being in relation to specific transactions or banking
services.”
• From the above, a bank customer may be described as a
person who has a relationship based on a general or
specific contract with a bank.
• The contract is created when the would-be customer
accepts any of the services offered for sale by the bank.
• The services are the statutory ones defined by baking
legislation and incidental ones arising from banking
custom and practice.
 • Natural persons
• Individual adults (men and women) above 18 years
• Persons below 18 years(minors)
• Persons who act as agents for others eg trustees, executors,
administrator
• Unincorporated groups and Artificial legal personalities like
companies
Types of • Clubs
• Associations
bank • Churches
customers • Partnerships
• Government and government agencies
• Public corporations
• Liquidators
• Schools, colleges and universities
• NGOs
• Embassies
• Agencies of international organizations in Ghana
 • To do financial business
• Banking laws and banking practices and customs
offer a wide range of banking service and products
• Customers’ needs include
• Depositing their surplus funds in the bank for
safekeeping and to earn some interest
Why • Instructing the bank to make and receive
payments and transfers on their behalves
customers go
• Applying for various forms of guarantees and
to the banks references;
• Depositing their valuables other than cash
• Seeking investment and other financial advice
• Obtaining non traditional banking services such
as insurance, securities and leasing facilities.
 • Statutory law has made inroads into traditional
methods by which banks deliver services
• Traditional banking services
• Acceptance of deposits and honouring withdrawals
• Lending
Banking • Payment and money transfers;
services • Proving guarantees and other commitments; and
• Safe custody of valuables
offered to
• Modern banking services
customers • Electronic banking
• Investment banking
• Financial advisory services
• Financial leasing
• Credit reference
 • Deposit-taking
• S 11(1) of the Banking Act, 2004 provides the statutory basis for
customers depositing their money in a bank.
• The English HOL case of Foley v Hill defines the nature of the
relationship created and the rights and duties attached to the
relationship when deposits are made by the customer.
• The HOL decided as follows:
Bank • When a customer saves or deposits money in the bank by way
of current account, fixed deposit or deposit account the bank in
customers taking the deposit becomes a debtor to the customer who now
becomes a creditor.

and the • From the point the money is deposited at the bank, the money
does not belong to the customer anymore.
banking law • It is the bank’s money because the bank has borrowed it; but
the bank is under an obligation to repay the money to the
customer when he demands it.
• If the bank fails to repay, it becomes a debtor, and the customer
has ll the rights of a creditor, including the right to bring court
action against the bank for his debts.
• Thus, the earliest judicial thinking on the nature of the
relationship between a bank and its customers was that it is one
of debtor/creditor relationship.
• This idea of debtor/creditor relationship has been accepted and
applied in Ghanaian courts in such cases as Harlley v. Ejura Fams
(Ghana) Ltd and in Kwetey v. Botchway and Another
• An important issue that must be noted in relation to deposit-taking
in contemporary times is the effect of the Anti-Money Laundering
and Foreign Exchange Acts on such deposits.
• Owing to the harmful and corrosive effects of money laundering on
financial systems and national economies worldwide the old practice
of depositing huge sums of money into a customer’s account without
questions by bankers has now given way to a new legal regime under
Ghana’s Anti-Money Laundering Act, 2007 (Act 749)
• Under this law and Know Your Customer Rules made be the
BOG bankers can now question the sources of huge deposits or
smaller but unusually regular deposit making.
• The bank is obliged to report such unusual or suspicious
deposits into a bank account for the Financial Intelligence
Centre of the BOG
• It is in the same veing of preventing “dirty money” into the
financial system that the Foreign Exchange Act 2006 (Act 723)
also seeks to ensure among others things that travelers carrying
money in excess of US$10,000.00 are obliged to pass such monies
through the Banking System whether as deposits for their bank
account or otherwise.
• Lending
• As in Foley v. Hill a bank is a debtor to a customer when a bank
takes a deposit.
• But when the bank lends money it has mobilized to any customer
in the form of a loan, or overdraft, or by discounting bills of
exchange or promissory notes, the customer becomes a debtor to
the bank; whilst the bank becomes a creditor or lender.
• Like the customer, the banker has equal rights to sue if the
customer defaults
• Recent legislative interventions affect lending/borrowing
relationships of banks and their customers
• Eg. A person borrowing money from a bank is subject to the
disclosure requirements under the Credit Reporting Act,
2007 (Act 726) if the borrower gives his consent
• Under the Act, a credit bureau can disclose the state of a
borrower’s financial affairs to a bank or lender to enable
that lender make an informed lending decision
• The credit bureau is however subject to civil and criminal
penalties form the borrower and the BOG/State respectively
if the bureau acts in breach of the Credit Reporting Act
• Another legislation is the Lenders Act 2008 (Act 773)
• Payments and Money Transfer
• The Payment Systems Act, 2003 and the Bills of
Exchange act, 1961 (Act 55) provide the legal
framework for providing the payment and money
transfere service
• The methods of payments are both manual and
electronic
• Cash and cheques represent some of the manual
payment media
• Electronic payments and transfer of funds are no
common in Ghana.
• Like the manual payment methods, electronic
payment is also unleasing its unique problems as
illustrated in two cases of ;
• Victoria Island Properties Ltd. and ANZ
Grindlays Bank Ltd v. Standard Chartered
Bank (Ghana) Ltd and E. O. Effiong
• Tsegah v Standard Chartered (Ghana) Ltd
 Victoria Island Properties Ltd. and ANZ Grindlays
Bank Ltd v. Standard Chartered Bank (Ghana)
Ltd and E. O. Effiong
• The plaintiff and co-plaintiff sued the defendants for
the sum of US$82000 being monies fraudulently
transferred by the 2nd defendant to a fictitious
account at a Stanchart’s branch in Accra; and which
was negligently paid by the Stanchart Bank.
• The 2nd defendant effect the frrud by addressing two
telefax instructions to the Grindlays Bank to transfer
$12,00 and $70,00 to the said account.
• It was alleged that the signature on the instructions
was forged.
• The communication to the 1st appellant for the
payment of the money to the 2nd appellant was
through SWIFT network
• The HC gave judgement in favour of the plaintiffs,
and CA confirmed it.
• On the issue of the negligence of the 1st
defendant, the SC held that
• The 1st appellant was not negligent under either
common law or the Bills of Exchange Act (Act 55)
because neither aspects of the law deals with
electronic transfer of funds.
• The payment message in the case was communicated
by electronic means and there the Act 55 could not
help.
• Dr. S. Twum JSC advised that
• “what is needed is a vigours search and the
development of new and relevant principles of law for
eh guidance of the Ghanaian banking community”
• NB; at the time of the case, the Payment
Systems Act was in existence;
• In Tsegah v Standard Chartered (Ghana) Ltd, unauthorized
withdrawals were made from the plaintiff’s account when he
was hospitalized and had not accessed his PIN on the Bank’s
ATM machine.
• When he demanded refund of the sum of C13.1million
unauthorized withdrawal, the Bank refused to pay.
• He therefore sued the Bank in the HC for recovery of the
amount.
• The court found that monies were withdrawn from the
customer’s account on several occasions through ATM card
fraud, and that before the plaintiff’s action, the Bank was
aware of frauds perpetuated on other ATM customer’s
accounts.
• The Bank however could not stop the malpractice as it
admitted in court that it did no have the equipment to
investigate such electronic fraud.
• On the basis of these and other findings, the court concluded
that the bank acted irresponsibly by failing to care about the
risk of ATM fraud that customers were exposed to withouta
putting in place measures to protect customers.
 • Dr. Mahamudu Bawumia (2010)
• MONETARY POLICY AND FINANCIAL SECTOR
REFORM IN AFRICA-GHANA’S EXPERIRENCE
(Combert Impressions, Accra; esp pages 111-149
• Nana Kegya Appiah-Adu:
• “Electronic Banking in Ghana Since Independence:
PLEASE the Case of Automated Teller Machines” at page 29
of MENSA-BONSU Et Al(ED) GHANA LAW SINCE
READ INDEPENDENCE-HISTORY, DEVELOPMENT
AND PROSPECTS
THESE • AVAILABLE IN THE LAW LIBRARY OF THE
MATERIAL FACULTY OF LAW
• Ernest Owusu-Dapaah
S • “Facilitating Access to Commercial Credit in Ghana:
the Role of the Law Since Independence” at page 96
of MENSA-BONSU Et Al(ED) GHANA LAW SINCE
INDEPENDENCE-HISTORY, DEVELOPMENT
AND PROSPECTS
 • 1992 Constitution
• Bank of Ghana Act, 2002 (Act 612)
• Banks and Specialised Deposit-
Taking Institutions Act, 2016 (Act
930)

Overview of the • Ghana Deposit Protection Act, 2016

(Act 931)

Broad
• ARB Apex Bank Ltd Regulations,
2006 (L.I.1825)
• Payment Systems Act, 2003 (Act

Constitutional and 662)

• Foreign Exchange Act, 2006 (Act
723)

Legal Framework • Credit Reporting Act, 2007 (Act

726)
• Borrowers and Lenders Act, 2008
(Act 773)
• Anti-Money Laundering Act 2007
(Act 749)
 • Article 183 of 1992 Constitution
• This article recognizes the existence of the Bank of
Ghana as the nation’s central bank, and
• Articulates its key functions as promotion of economic
development through;
• Issuance of the currency of Ghana
The Broad • Maintaining the stability of the currency (i.e. monetary
Constitutional policy)
• Custodian of state funds;
& Legal
• Operation of a banking and credit system; and
Framework • Managing the nation’s foreign exchange resources
• To discharge these functions the Constitution has given the
BOG exclusive powers to perform the functions specified
above and has also made the Governor the only Chief
Executive Officer of a State institution who is also the
Chairman of the Board of Directors.
 • Bank of Ghana Act, 2002 (Act 612)
• This Act seeks to establish the statutory framework for
achieving the central bank’s constitutional mandate.
• Pursuant to this, the Act, for the first time, defines the
object of the BOG as maintenance of stability in the
general level of prices; and
The Broad • Also sets out more clearly the principal functions of the
Constitutional BOG-i.e.
• Formulation and implementation of monetary policy
& Legal • Currency note issue
Framework • Promotion, regulation and supervision of payment systems, and
• Maintenance of financial stability through the regulation and
supervision of the banking and financial system
• The detailed powers, independence and accountability
mechanisms required to discharge these onerous
responsibilities have also been legislated.
 • Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act
930)
• The chief object of this Act is to amend and consolidate the laws
relating to deposit-taking; to regulate institutions which carry on
deposit-taking business, and to provide for related matters.
• The purpose of such regulations is to ensure the maintenance of
financially sound, stable and safe deposit-taking institutions which
The Broad conduct their business in a manner that safeguards the investments
of depositors and also protects the integrity of the broad banking and
Constitutional specialised deposit-taking system is a critical condition for the
functions of an efficient financial system.
& Legal • The key principles enshrined in the Act to achieve these objectives
include;
Framework • Licensing requirements
• Capital and ownership structures
• Management
• Risk control measures
• Permissible and prohibited activities
• Transparency,
• International best practices and standards
 • Ghana Deposit Protection Act, 2016 (Act 931)
• Act 931 seeks to protect small depositors from loss incurred
as a result of the occurrence of an insured event, and also to
provide for the development of a safe, sound, efficient and
stable financial system in Ghana, by establishing a Deposit
The Broad Protection Scheme, a Deposit Protection Fund, a Deposit
Protection Corporation and related matters.
Constitutional • ARB Apex Bank Ltd Regulations, 2006 (L.I.1825)
& Legal • The objective is to provide special rules for the
establishment, operation and supervision of the ARB Apex
Framework Bank Ltd., and to confer upon that bank, the power to
inspect, regulate and supervise rural and community banks
on behalf of the Bank of Ghana
 • Payment Systems Act, 2003 (Act 662)
• The object of the Act is to provide a statutory framework for
the establishment, operation and supervision of electronic
and other payment, clearing and settlement systems including
related infrastructure as well as for the rights and obligations
of the transacting and intermediating parties.

The Broad • Foreign Exchange Act, 2006 (Act 723)

• The purpose of the Act is to give effect to the economic policy
Constitutional of liberalizing and deregulation in foreign exchange related
& Legal transactions by providing for the exchange of foreign
currency for international payment transactions and
Framework transfers; and
• By regulating foreign exchange business.
• The Act did not only repeal the Exchange Control Act, 1961
(Act 71) which expressly prohibited foreign exchange
transactions unless permitted by the Bank of Ghana and/or
Ministry of Finance, but it also introduced the new contrary
philosophy that all foreign exchange transactions are
permissible unless expressly prohibited.
 • Credit Reporting Act, 2007 (Act 726)
• The Act seeks to introduce a legal and regulatory framework for
credit reporting in Ghana, as an essential element in the
development and maintenance of an effective financial sector.
• The lack of a credit information system increases the risks of
lending, which in turn causes financial institutions to provide less
credit
The Broad • Specifically, the Act is designed to:
Constitutional • Promote the orderly development of credit reporting and public trust in
credit bureau operation;

& Legal • Provide for the licensing of private credit bureaus.

• Regulate the activities of credit bureau
Framework • Establish guiding principles for the conduct of the credit reporting system
• Provide for credit data submission, management, protection, dissemination
• Create a balance between the rights of borrowers and those of lenders
• Enable the central bank to monitor systemic risks on an aggregate basis to
ensure financial stability
• A functional credit reporting system would provide timely, accurate
and up-to-date information on the debt profile and repayment
history of borrowers.
 • Borrowers and Lenders Act, 2008 (Act 773)
• The purpose of the Act is to improve the protections
for lenders and borrowers in order to ensure long-
term viability of the credit system
• Such a purpose is to be achieved by
The Broad • Setting out the rights and obligations of lenders
and borrowers in the credit relationship
Constitutional • Setting standards of information disclosure by
& Legal lenders and borrowers, to facilitate transparency
in the business of lending and borrowing
Framework • Prohibiting certain credit practices
• Legislating enforcement of collateral registry; and
• Empowering the Bank of Ghana to regulate,
supervise and direct the credit system in
accordance with its constitutional mandate.
 • Anti-Money Laundering Act 2007 (Act 749)
• The object of the Act is to provide the legal
framework for
• detecting ,
• preventing and
The Broad • prohibiting money laundering; and
Constitutional • for establishing a Financial Intelligence Center
& Legal to, among other things,
Framework • identify,
• process,
• analyze and
• disseminate suspected money laundering
information to investigative, supervisory and
intelligence agencies for necessary action.
 • Licensing
General principles • Supervision
of bank & SDTI • Minimum
requirements
regulation • Market discipline
 • A person who wants to carry on a deposit-taking
business either in Ghana or from within Ghana must
first satisfy the requirement of being a body corporate
which is formed under the laws of Ghana. (Section 4(1)
of Act 930).
• This means that an individual is automatically
disqualified to carry on a deposit-taking business either
Licensing in Ghana or from within Ghana. Only companies
qualify. The location of the deposit-taking business is
Banks & equally interesting.
SDTIs • The targeted setting of the deposit-taking business is
both in Ghana and from within Ghana. This means that
one can accept deposits locally whilst physically present
in Ghana. And also accept deposits from outside Ghana
even though the person is physically present in Ghana.
• What is not covered is where a person located outside
Ghana accepts deposits from persons who are in Ghana.
 • Secondly the company must be one formed under the
Companies Act, 1963 (Act 179).
• Companies formed outside Ghana can only carry out
a deposit-taking business either in Ghana or from
within Ghana with the prior written approval of the
Bank of Ghana. (Section 4(2) of Act 930).
• This provision has implications foreign companies
Licensing established in Ghana as external companies under the
Banks & Companies Act, 1963 (Act 179). It seems such a
companies must clear with the Bank of Ghana before
SDTIs carrying out a deposit-taking business in Ghana or
from within Ghana.
• And the Bank of Ghana is required to issue directives
to govern the operations of such foreign companies
licensed to carry out the deposit-taking business in
Ghana or from within Ghana. (Section 4(5) of Act
930)
 • Another interesting idea in the Act 930 is in the area
of microfinance. Here only Ghanaians are allowed to
be shareholders of a deposit-taking microfinance
institution. (Section 4(3) of Act 930)
• What is deposit-taking business? It means (a) taking
money on deposit and making loans or other
advances of money; and (b) financial activities
Licensing prescribed by the Bank of Ghana (Section 4(5) of Act
930).
Banks &
• A licence issued in accordance with Act 930 is
SDTIs required before one can accept deposit form the
general public or carry on a deposit-taking business in
Ghana or from within Ghana. (Section 6(1) of Act
930). And the Bank of Ghana has the discretion to
prescribe classes of liabilities that constitute deposits.
(Section 6(2) of Act 930)
 • A person who proposes to carry on a deposit-taking business
in or from within Ghana is required under Section 7(1) of Act
930 to apply in writing to the Bank of Ghana for a license to
carry on a deposit-taking business.
• The written application must be accompanied with a set of
specified documents.
• The documents are; (1) Company Regulations, (2) detailed
particulars of the significant shareholders of the company, (3)
Licensing organizational structure including diagram where the
Banks & company is a member of a group, direct and indirect affiliates
of the company, (4) detailed particulars of the proposed
SDTIs directors and management personnel, (5) feasibility report,
(6) documentary evidence of capital, (7) in the case of foreign
applicant a written confirmation from the supervisory
authority in the foreign country, (8) corporate governance
statement, (9) statutory declaration of directors speaking to
any criminal history or bankruptcy, (10) a processing fee to be
prescribed by the Bank of Ghana, and (11) any other
particulars that the Bank of Ghana may require. (Section 7(2)
of Act 930).
 • The application must also indicate clearly the type of
licence applied for.
• In this case, there are two types of licence; either (a)
banking licence or (b) specialised deposit-taking
institution licence. (Section 8(3) of Act 930).
• A specialised deposit-taking institution license is
issued to an applicant whose primary activities are
Licensing limited to deposit-taking business. (Section 8(4) of Act
Banks & 930).
SDTIs • The name of the specialised deposit-taking institution
(SDTI) must be clearly designate which category of
specialised deposit-taking institution licence that
institution operates under in accordance with rules
prescribed by the Bank of Ghana. (Section 8(5) of Act
930)
 • On application, the Bank of Ghana has 10 working days to acknowledge
receipt of the application, and it has six months to communicate its
decision in writing to the applicant. (Section 7(7) of Act 930). But not the
Bank of Ghana may extend the time after the six months to a reasonable
time to complete further investigation
• Before issuing a licence the Bank of Ghana must satisfy itself of certain
pre-requisites for a licence.
• These pre-requisite are: (1) feasibility report based on sound analysis
based on reasonable assumption; (2) proposed directors and key
Licensing management personnel must be fit and proper persons; (3) suitable
shareholders; (4) suitable significant shareholder; (5) ownership
Banks & structure must not hinder effective supervision; (6) adequate paid-up
capital and acceptable original sources not including borrowed fund; (7)
SDTIs adequate governance arrangement; (8) not being a shell company; and
(9) compliance with Act 930, its Regulations, directives and other legally-
binding instruments made under Act 930, and any other conditions that
the Bank of Ghana may impose. (Section 9 of Act 930)
• The Bank of Ghana may issue a provisional approval of a licence for a
subsidiary of a foreign bank or SDTI by satisfying itself that the foreign
bank or foreign SDTI is adequately supervised on a global consolidated
basis by the home country supervisor, and that there are arrangements
for cooperation, coordination, and information-sharing with the home
country supervisor (Section 10(1) of Act 930)
 • Next is final approval and issuance of banking or
specialized deposit-taking institution licence.
• The Bank of Ghana issues final approval licence after
it is satisfied with; the applicant's organizational and
infrastructural arrangements, applicant's compliance
with teh terms and conditions of the provisional
licence, and the applicant's meeting of the pre-
Licensing requisites of licence. (Section 12(1) of Act 930)
Banks & • The applicant has to pay processing fee, initial licence
fee, and annual licence fee that the Bank of Ghana
SDTIs may specify by notice. (Section 12 (2) of Act 930).
• The Bank of Ghana has to notify the Ghana Deposit
Protection Corporation established under the Ghana
Deposit Protection Act, 2016 (Act 931) of the issuance
of the licence. (Section 12(3) of Act 930).
 • Licence issued by the Bank of Ghana under Act 930 are
not transferable, and that it is an offence for one to
transfer or assign a licence. (Section 13 of Act 930). The
licence is also issued subject to such conditions as the
Bank of Ghana may impose. These conditions include for
example, membership of the Ghana Deposit Protection
Scheme under Act 931, and specified activities which the
applicant is permitted to engage in (Section 14(1) of Act
Licensing 930)
Banks & • The Bank of Ghana has the discretion to refuse an
application where it is not satisfied with the merit of the
SDTIs application in view of the prevailing conditions in the
banking and specialized deposit-taking institution sector,
(Section 15(1) of Act 930) but the Bank of Ghana has to
give written reasons for the refusal. (Section 15(2) of Act
930).
• The Bank has power to revoke the licence on stated
grounds including not commencing business within a year
from the date the licence is issued. (Section 16 of Act 930)
 • The BOG has to keep a Central Register of licensed banks and SDTI,
and it must publish the Register on website (Section 17 of Act 930)
• Banks and SDTIs are forbidden from engaging directly in a
commercial, agricultural or industrial undertaking. (Section 19(1) of
Act 930).
• They are not to build, purchase or take a lease of immovable
property. (Section 19(2) of Act 930).
• There are however exceptions this rule. And the exceptions are as
Licensing follows:
• provision of business premises, or for housing staff of the bank or SDTI
Banks & • amenities for staff
• They may also accept immovable property as collateral security for a
SDTIs debt or other liability and may acquire an interest which a bank,
SDTI or financial holding company may lawfully acquire in the
satisfaction of a debt due that bank, SDTI or financial holding
company (Section 19(3) of Act 930).
• But an interest thus acquired must be disposed of by the bank of
SDTI or financial holding company within one year after the
acquisition or within such time that the Bank of Ghana may
determine on application by the bank, SDTI or financial holding
company. (Section 19(4) of Act 930).
 • BOG has several powers in dealing with persons who
engage in unauthorized deposit-taking business in
contravention of Section 6 of Act 930. This include the
power to authorise any of its officers to enter premises or
property of a person dealing in, and search for a book,
record, statement, document or any other item; power of
seizure, power to question key persons, power to search
building, power to close down business, power to request
Licensing the production of books, power to freeze account, suspend
business. (Section 20)
Banks & • BOG has power to instruct in writing the repayment of
SDTIs moneys and assets gained from unauthorized deposit-taking
business in contravention with section 6. (Section 20)
• In addition to the above, it is an offence to carry out
deposit-taking business, an on summary conviction, in the
case of the company involved, it is liable to pay a fine of
between 2500 and 5000 penalty units; and in the case of
director, a fine of between 1500 to 3000 penalty units.
(Section 22)
 • A bank or SDTI is required to display copies of its licence at
its HQ, branches, and agencies (s. 24)
• Bank and SDTI are required to operate only from their
licensed place of business. (s. 25)
• And that a Bank and SDTI must secure the approval of the
BOG before opening or closing a new branch, agency,
mobilization Centre or HG (s. 26)
Licensing • Similarly, a foreign specialised deposit-taking institution
must obtain the prior written approval of BOG to establish
Banks & a representative office in Ghana. The representative office is
required to provide only information and perform liaison
SDTIs functions. It cannot carry out any deposit-taking business.
(s. 26)
• To change its name or Regulations with the Registrar
General’s Department, the bank or SDTI must first the
approval of the BOG, and after the change of name etc, it
must file a certified copy of the amendment with BOG. An
administrative penalty of 2500 penalty units applies for
default. (s 27)
 • For consolidated supervision or any other specialised
supervision purposes, a bank or SDTI which is a
member of a corporate group must furnish BOG with
complete organization structure of the group at least
twice a year. (s 42).
• Registration requirements for financial holding
companies (FHCs) are set out in sections 43 to 47.

Licensing • It is unlawful for one, without prior written approval

of BOG, to undertake an action such as; (a)causing a
FHCs company to become an FHC, or (b) causing a bank or
SDTI to become a subsidiary of an FHC, or (c)causing
an FHC to acquire direct or indirect ownership or
control of more than 5% of the voting shares of a
bank or SDTI, or (d) causing an FHC or its
subsidiary which is not a bank or SDTI to acquire all
or substantially all of the assets of a bank or SDTI, or
(e) causing an FHC to merge with other FHC (s 43)
 • For a company to function as an FHC, it must be
registered as an FHC by the BOG. To register an FHC
therefore, (a) one must apply to the BOG in writing on a
form to be prescribed by BOG, (b) pay a non-refundable
application fee, (c) attach specified information and
documents detailing out such matter as capital
resources, name and contact details and preceding 10
years professional history, organizational and
managerial structures, particulars of directors,
Licensing feasibility report, audited financial statement, sound
FHCs corporate governance principles, statutory declaration
verifying criminal history of directors, key management
personal or significant shareholders. And the BOG can
refuse to register an FHC applicant, if BOG is not
satisfied, among others, that; (a) the feasibility report is
based on found analysis, or (b) that key management
personnel are fit and proper, or (c) proposed significant
shareholders are suitable, and management structure
will not hinder supervision, etc (s 44)
 • Just like banks and SDTIs, FHCs are required to
display copies of their certificate of registration at HQ.
Failure attracts a penalty fee of 1000 penalty units (s 45)
• An FHC is restricted, without prior written approval of
BOG, from (a) directly or indirectly controlling any
member of of another financial group, (b) directly or
indirectly acquiring or holding shares or ownership
interest in a commercial, agricultural or industrial
Licensing company. But an FHC is allowed to invest in a company
that engages in permissible activities for banks and
FHCs SDTIs. For this purpose, the BOG has the power to
prescribe rules relating to, among others, maximum
percentage of shares or class or the maximum value of
ownership interests that may be acquired or held. And
BOG can exempt a foreign bank or foreign SDTI,
foreign financial institution or foreign FHC if BOG is
satisfied that such foreign bank, SDTI, financial
institution, or FHC is adequately regulated. (s 46).
 • Powers of regulation and supervision of the BOG are contained in
sections 91 to 106, and this includes BOG powers; (a) to regulate and
supervise (s 97), (b) to issue directives (s 98); (c)to require the
submission of information or data on assets, liabilities, income,
expenditure, affairs (s 93); (d) to carry out examinations of the
operations and affairs of banks, SDTI or FHC (s 94); (e) to carry out,
unannounced investigations and scrutiny into a specific matter or
activity or office relating to affairs of a bank, SDTI, or FHC (95); (f)
BOG authorized examiners’ power to have access to the books and
records of bank, SDTI or GHC (s 96); (g) BOG authorized officials’
power to take custody of records, files or any other documents relevant
to the examination or investigation (s 97); (h) BOG authorized officials’
Supervision power to verify any return, information or data (s 98); (i) power to
furnish examination reports on Bank, SDTI, or FHCs and demand
explanations be given in 45 days (s 99); (j) power of follow-up action on
examination and other supervisory reports (100); (k) to appoint
auditor (s 101); (l) to take remedial measures for banks, SDTIs or
FHCs (s. 102); (m) to take remedial measures for directors, key
management personnel, and significant shareholders (s 103); (n) to
take prompt corrective action for adequately capitalized banks, SDTIs
or FHCs suffering material losses (s 104); (o) to take prompt corrective
action for undercapitalized banks, SDTIs or FHCs (s 105); and (p) to
take prompt corrective action for significantly undercapitalized banks,
SDTIs or FHCs, (s 106)
 • BOG may require restructuring of ownership of bank,
SDTI (s 47), and may withdraw the registration of an
FHC and require divestiture of a bank or SDTI on stated
grounds (s 48). Banks, SDTIs, and FHCs are required, at
end of June and December each year, to furnish BOG
with a report listing significant shareholders. One
cannot, without the prior written approval of BOG,
directly or indirectly, either alone or in concert with
others; (a) acquire shares in a bank, SDTI or FHC,
which in total constitute significant holding, (b) increase
Supervision the ownership interest in a bank, SDTI, or FHC, if
aggregate ownership interest after the increase, would
exceed any one of following supervisory thresholds of
5%, 10%, 20%, 30%, 50% or 75% of equity, (c) sell or
dispose of shares in a bank, SDTI, or FHC, if as a result
of the transaction, the shareholding will fall below any
one of following supervisory thresholds of 5%, 10%,
20%, 30%, 50%, (d) enter into an agreement which will
result in a change in the control of a FHC. (s 49)
 • BOG may disapprove a proposed transfer of shares in
the interest of sound and prudent management of a
bank of SDTI and the functioning and stability of the
overall financial system preventive measures. (s 50)
• BOG has power to prescribe a cap on the ownership of
banks or SDTIs in the form of a restriction that
ownership of a specified SDTI be limited to ownership
by individuals or that ownership be capped at a certain
percentage for all or some types of owners. (s 51).
Supervision • One can only enter into an agreement or an
arrangement to (a) sell or dispose or transfer either the
whole or a part of business of a bank, SDTI, or FHC, (b)
amalgamate or merge a bank, SDTI or FHC with any
other bank, SDTI, or FHC, (c) reconstruct a bank, SDTI
or FHC, by submitting an application on the proposed
agreement or arrangement for the approval of BOG.
BOG has six months from the date of receipt of the
complete information to communicate its decision. (s 52)
 • BOG may require a director or key management
personnel of applicant for furnish it with additional
information or documents. On receipt, BOG may consider
application and refuse or approve the application (s 53),
based on the following consideration; (a) financial and
managerial resources of existing or future institutions, (b)
effect of the proposed transaction on completion, (c)
convenience and needs of the community to be served, (d)
the risk to the stability of the banking and financial
system, (e) effectiveness of the existing bank or SDTI
Supervision involved in the proposed transaction in combating money
laundering and terrorist financing. (s 54)
• Where BOG has proof of non-compliance, BOG can by
order, (a) annul the transfer, merger, amalgamation or
reconstruction, (b) prohibit the exercise of voting rights in
respect of the shares; (c) prohibit the payment of dividend
in respect of the shares; (d) prohibit the issue of ‘bonus
shares’ or ‘right issue’ in respect of the share. (s 55)
 • BOG may prescribe rules regarding any matter of
corporate governance of a bank, SDTI or FHC that
the BOG considers necessary or appropriate to ensure
prudent operation (s 56). Directors are required,
among others, to report on (a) the capacity of the
bank, SDTI or FHC, to properly conduct the business
of the bank, SDTI, or FHC, (b) likelihood to meeting
the obligations of the bank, SDTI or FHC. (s 57)
• A person shall not be appointed or elected as a
Supervision director or key management personnel of a bank,
SDTI or FHC if that person, (a) is adjudged unsound
mind, (b) declared insolvent, (c) been convicted of
fraud, or dishonesty or moral turpitude offence, (d)
has been director, key management personnel or
associated with the management of an institution
which is being wound up by a court of competent
jurisdiction on account of bankruptcy or an offence
committed under enactment. (s 58)
 • Banks, SDTIs, and financial holding companies are
required to maintain in Ghana a minimum paid-up capital,
unimpaired by losses. For this reason, the BOG has power
to prescribe different requirements for different classes of
deposit-taking institutions. To calculate impairment of
paid-up capital, losses are to be set off against income
surplus and other distributable reserves excluding
revaluation reserves, and against Reserve Fund. (s. 28)
Minimum • BOG may issue a directive to prescribe a risk-based capital
Requirements adequacy requirement, as a percentage of the capital of the
bank, SDTI or the financial holding company. Minimum
-capital, capital adequacy ratio is pegged at 10%, but the BOG may
consider the risk and vulnerability of the financial system
and prescribe a higher capital adequacy ratio percentage,
or prescribe different ratios for different bank, financial
holding companies and for different classes of SDTI. BOG
may also prescribe one or more capital buffers above the
minimum capital adequacy ration. It may also prescribe a
leverage or gearing ratio, necessary or prudent (s. 29)
 • BOG may require a bank or SDTI or financial holding
company to maintain additional capital which it considers
appropriate to address concentration of risks in the bank,
SDTI or financial holding company or in the financial system.
(s. 30)
• BOG may also prescribe capital adequacy requirement on
consolidated basis to a bank, SDTI or their subsidiary. (s 31)
• A bank or SDTI has to promptly notify the BOG with
Minimum particulars of non-compliance, where it fails to comply with
the prescribed minimum capital adequacy ratio, otherwise, it
Requirement- is liable to pay an administrative penalty of 1000 penalty units
capital (s 32). And where a bank, SDTI, or a financial holding
company fails to maintain the level of minimum unimpaired
paid up capital under s.28 or the capital adequacy ratio under
ss. 29 to 31, it is liable to pay to the BOG, on each day of
default, a penalty of one-half per mille of he difference
between the capital that it should have maintained and the
capital of the capital actually maintained. And a director of a
bank, SDTI in default is also personally liable for pay to the
BOG an administrative penalty of 500 penalty units.
 • Banks and SDTIs are also required to establish and maintain a
Reserve Fund, to receive transfers from their annual net profits as
follows; (a) where amount in the RF is less than 50% of paid-up
capital, the Bank or SDTI must transfer into the RF an amount
equivalent to at least 50% of the annual net profits, (b) where
amount in RF is between 50%-100% of paid-up capital, the Bank
or SDTI must transfer in to the RF an amount equivalent to at least
25% of the annual net profits, (c) where amount in RF is 100% or
more of paid-up capital, the Bank or SDTI must transfer in to the
Minimum RF an amount equivalent to at least 12.5% of the annual net
profits. And the transfer must be made before any declaration of
Requirements interim or interim dividends, and after tax provision. An
administrative penalty of 2000 applies for default. (s. 34)
-reserve • A bank or SDTI cannot declare or pay interim or final dividends
before; (a) completely writing off capitalized expenditure, or (b)
making the required provision for non-performing loans, or (c)
satisfying prescribed capital requirements, etc. It the bank defaults
in this, each director of the bank or SDTI, unless he was unaware
or was diligent enough, is personally liable to pay to the BOG
administrative penal of 500 penalty units, and the bank or SDTI
itself is also liable to pay to BOG an administrative penalty of 1000
penalty units.(s 35)
 • BOG is required to prescribe one or more liquidity
requirements for banks, SDTIs and financial holding
companies in a directive. Different liquidity
requirements may be prescribed for banks, SDTIs or
classes of SDTIs and financial holding companies. It
may also prescribe qualitative criteria required for
the liquidity risk management policies and procedures
Minimum for banks, SDTIs and financial group. A bank or SDTI
is required to submit a report on its liquid assets for
Requirements any period the BOG may require. (s 36)
-liquidity • Act 930 framework provisions on liquidity
requirements are similar to that of capital
requirements in terms of the BOG’s power to issue
directive to prescribe liquidity on consolidated basis (s
37), imposing a higher liquidity requirement (s38),
prompt notification for non-compliance with
minimum liquidity requirements (s39), penalties for
non-compliance (s 40), and net open position (s 41)
 • Official administration (ss 107-122)
• Receivership and liquidation (ss 123-139) (NB; that provisions of
the Companies Act, 1963 (Act 179), Bodies Corporate (Official
Liquidations) Act, 1963 (180) or any other enactment on corporate
insolvency or liquidation no longer applies to the winding up and
liquidation or an insolvent bank or SDTI (s 138); what about
FHCs?)
• Miscellaneous including; (a) review of decisions of BOG on
Other licensing (s 140), (b) review of decision of BOG on official
administration, liquidation and receivership by arbitration (s 141),
Regulatory (c) review of decisions through arbitration (s 142) (d) unclaimed
balances (s 142) (e) prohibition of floating charge (s 144), (f)
issues confidentiality obligations of officials and employees of BOG (s
145), (g) secrecy of customer information (s 146), (h) agreement for
exchange of information (s 147), (i) disclosure of information to
banks, SDTIs or FHCs (s 148), (j)protection from liability and
indemnification (s 150), (k) collection of civil penalties (s 151), (l)
prosecution of offences and penalties (s 152), (m) joinder of offences
(s 153), (n) general penalty (s 154), (o) regulations (s 155), (p)
interpretation (s 156), (q) repeal and savings (s 157), (r) validity of
existing licence (s 158), and (s) transitional provisions (s 159), (t)
moratorium for transition (s 160)
 • In the US case of Camp v. Pitts, Pitts applied for a banking
licence in 1967.
• The Comptroller of the Currency declined the applications on
the ground that
• “the factors in support of the establishment of a new National
Bank in this area are not favorable ”
• No formal hearing was required under the controlling statute
or regulations, but the regulations provided for hearings when
Other requested and when granted at the discretion of the
Comptroller.
Regulatory • The applicants did not request a formal hearing but asked for
reconsideration.
issues • This request was granted, but the Comptroller came to same
conclusion.
• The applicants brought an action in the Federal District
Court, seeking a review of the Comptroller’s decision.
• The Court ruled in favour of the Comptroller stating that the
review was unnecessary in the circumstances; and
• That there was substantial basis for the determination, and it
was neither capricious nor arbitrary.
 • On appeal, the CA held that the Comptroller’s ruling was
unacceptable because its basis was not stated with sufficient clarity
to permit judicial review
• The Supreme Court granted a certiorari to quash the CA decision
on the ground that the Comptroller adequately explained his
decision.
• The appropriate standard for review was whether the Comptroller’s
adjudication was arbitrary, capricious, an abuse of discretion or
Other otherwise not in accordance with law.

Regulatory • In applying that standard, the focal point for judicial review should
be the administrative record already in existence, not some new
issues record.
• The option of challenging BOG’s licensing powers is open to
Ghanaians too.
• In the case of Ghana, an applicant for a banking license is obliged
under section 9 of the Banking Act, 2004 to first exercise his right of
appeal to the Minister of Finance before going to the court.
• The right to go to court uninhibited is a cardinal constitutional
principle in Ghana.
 • In Afare Donkor v. Bank of Ghana, the BOG in 1996 directed the
Board of Directors of CAL Merchant Bank that, for engaging in
illegal financial operations at SDC Investment Ltd., the BOG no
longer found Mr. Afare Donkor acceptable to the central bank as
a director of any financial institution.
• Consequently, the plaintiff was removed as MD of Cal Merchant
Bank.
• About eight years later, the plaintiff filed an application for
Other judicial review of the directive.
• Specifically he sought a declaration that
Regulatory • The BOG had no power to perpetually disqualify the applicant
issues contrary to Articles 23 and 29 of the 1992 Constitution
• The continued disqualification of the applicant constituted a breach
of the applicant’s fundamental human rights
• Disqualification of a person from acting as a director of a financial
institution cannot be indefinite but should be time bound
• The said disqualification was null and void and should be
rescinded.
 • The HC, per Victor Ofoe J (as he then was)
held that the BOG had no power to direct
CAL Merchant Bank to remove the applicant
from his position as MD, and that it went
beyond its powers.
• Accordingly, he concluded that the
Other disqualification of the applicant was wrongful
Regulatory and void.
issues • The court however, stated that though the
BOG’s position was not supportable in law yet
it was intended to protect the banking
community.
• The BOG appealed to the CA was dismissed.
 • Sometimes, supervisors are requested by Government or
their agencies to direct a bank to freeze the account of a
customer for one reason or the other.
• Such directives have also been successfully challenged.
• The Nigerian case of Eagle Line Ltd. v. Federal Attorney-
General is relevant to the issue of freezing accounts.
• In this case, the Bank Examiner of the Central Bank of
Other Nigeria (CBN) in the exercise of a statutory power,
directed certain commercial banks with whom the
Regulatory plaintiffs had dealings as customers to freeze their
issues accounts because he was “of opinion that” items in the
accounts confirmed or tended to confirm the reasonable
suspicion of the Head of State of Nigeria of irregularities.
• The directive was declared illegal, void and of no effect
because of manifest disregard of the provisions of the
empowering statute.
 • Contrary to the Banking Amendment Decree of 1966 (No.
5 of 1966), the Bank Examiner froze the account for one
and half years instead of the statutory limit of three
months.
• Moreover, he failed to conduct an investigation into the
accounts as a statutory conduction precedent to the
freezing of the accounts.
• Finally, he used the wrong form in communicating the
Other directive to the banks.
• In his judgment, Taylor C.J. said that a statutory tribunal
Regulatory must confine itself within its statutory powers and not
issues misconstrue the limits of its mandate to inquire and decide
as set out in the statute; and that a bank examiner must
not order to freezing of a bank account under the Banking
Amendment Decree 1966 without investigation the
account and reporting his findings in the prescribed
manner.
• It is ultra vires the Decree to free a bank account for a
period exceeding three months or without first
investigating the account.
 • In Ghana, the 1992 Constitution does not empower
any authority to freeze the accounts of anybody.
• The Economic and Organized Crime Office Act,
however authorized the Director of under to cause the
assets and bank accounts of a person or organization
under investigation for any alleged violation
characterized as a serious fraud to be frozen.

Other • After the Director has directed the freezing of a bank

account or any assets, he is obliged to seek
Regulatory confirmation from the court within 7 days.

issues
 • In our jurisdiction some commentators have
criticized the BOG for the collapse of some rural
and other banks because of improper supervision
by the BOG
• The issue whether or not the regulator should be
held responsible for the failure of a bank in Ghana
has not been tested in our courts.
Where a bank • In Hong Kong and England the courts have
fails examined and determine the issue.
• Regulators have sometimes been blamed for
negligence where a bank runs into crisis or fails.
• However, attempts made in some countries to
sustain the proposition that regulators owe
depositors a duty of care in the exercise of their
regulatory functions have invariable been
unsuccessful.
 • The Hong Kong case of Yuen Kun Yeu v.
Attorney-General of Hong Kong illustrates
this point.
• After a bank had gone into liquidation, some
depositors who had lost their deposits brought
an action for damages for negligence against
the AG, representing the bank.
Where a bank
• They argued that if the supervisor had
fails exercised reasonable care, it would have
known that the bank’s affairs were being
conducted fraudulently, speculatively and to
the detriment of its depositors, and would
have ensured compliance with the law.
 • In dismissing the appeal, the Privy Council held that
• The supervisors had no power under the law to control the
management of a bank, and there was no special relationship
between the supervisor and the bank and its managers which
placed the supervisor under a duty of care to prevent the
company and its managers causing financial loss to depositors
• In all the circumstances, the relations between the supervisors
and the depositors were insufficiently close and direct for the
former to owe the latter a duty in performing its functions
Where a bank under the Banking Ordinance
• The supervisor owed no liability to depositors for negligent
fails misrepresentation since the Ordinance merely placed him
under a duty to supervise banks in the public interest and
imposed no special responsibility on him towards individual
depositors
• In licencing a bank and allowing it to remain in
business, the supervisor was in fact making no
representation as to the credit worthiness of the bank
on which the depositors were entitled to rely.
 • Similarly, in the English case of Johnson Mattey v. Arthur
Young (Bank of England, Third Party), Saville, J held that
the Bank of England was under no duty to exercise
reasonable skill and care in performing its supervisory
functions in order to prevent losses which arose as a result of
imprudent or careless management of the bank.
• The principles of common sense did not indicate that this
obligation existed.

Where a bank • The principles justifying the exoneration of the central bank
from liability where a bank fails cannot have universal
fails application.
• The nature and circumstances of the situation are of essence
in the determination of the culpability of the central bank.
• For example, in a jurisdiction like Ghana where the Banking laws
and Borrowers and Lenders Act oblige the central bank to protect
depositor, the regulator could share part of the blame if the factors
leading to the bank’s collapse are such that a prudent regulator
could have detected and prevented the occurrence of a collapse at a
time an examination took place.
 • It is part of the statutory mandate of the BOG to act as banker
and financial adviser to Government.
• As part of this mandate, the BOG is authorized to guarantee a
loan to Government or a Government agency by a foreign
institution at the written request of the Minister of Finance and
Economic Planning.
• On a number of occasions the performance of this function has
been challenged both in our local courts, and foreign courts.
As • For example, a landmark judgment was delivered in FAROE
ATLANTIC CO. LTD v ATTORNEY GENERAL by the Supreme
Government’s Court in 2004 in respect of BOG guarantees issued at the request
Bank of the Ministry of Finance
• The facts of the case are that in April 1998, the Government of
Ghana (GOG), acting through the Ministry of Mines and Energy
(the Purchaser), entered into a Power Purchase Agreement (PPA)
with Faroe Atlantic Co Ltd. of the UK, (the Seller)
• The purpose of the agreement was for the Seller to install, operate
and maintain a thermal generation power plant at Tema and to
sell and deliver the electricity produced to the Purchaser to buy.
 • As part of the conditions precedent to the
effectiveness of the Agreement, the Purchaser was
required to provide the Seller within 14 days of the
signing of the agreement, a Payment Guarantee issued
by the BOG in the sum of $8,250,704.00.
• In May, 1998 the Ministry of Finance requested the
BOG to issue the said guarantee.
As • By a letter dated May 14, 1998 the Controller and
Government’s Accountant General informed the BOG which
Government account to debit in the event of default.
Bank
• In July 1998 when the BOG wrote to the Minister to
seek clarification whether the transaction did not
require Parliamentary approval, the Ministry replied
in the negative and the BOG went ahead to issue the
guarantee.
 • When the Purchaser defaulted in the performance of its obligations
under Agreement, the Seller sued in the High Court claiming specific
performance of the PPA.
• On September 8, 1998 summary judgment was given against the
Attorney-General who appealed to the Court of Appeal.
• When the appeal was dismissed on July 24, 2003, the AG appealed
further to the Supreme Court.
• One of the grounds of appeal argued by the AG was that the PPA was
void and unenforceable as it did not receive Parliamentary approval as
As required under Article 181 of the 1992 Constitution.

Government’s • Article 181(1)(2)(3) & (5) provides that

• (1)  Parliament may, by a resolution supported by the votes of a majority of all the
Bank members of Parliament, authorise the Government to enter into an agreement for
the granting of a loan out of any public fund or public account.
• (2)  An agreement entered into under clause (1) of this article shall be laid before
Parliament and shall not come into operation unless it is approved by a resolution
of Parliament.
• (3)  No loan shall be raised by the Government on behalf of itself or any other
public institution or authority otherwise than by or under the authority of an Act
of Parliament.
• (5)  This article shall, with the necessary modifications by Parliament, apply to an
international business or economic transaction to which the Government is a
party as it applies to a loan.
 • The Supreme Court per Dr. Date-Bah, JSC construed the
article as follows:
• “the plain meaning of article 181(5) would appear to be that
where the Government of Ghana enters into ‘an international
business or economic transaction’ it must comply with the
requirements mutatis mutandis, imposed by article 181 of the
Constitution. Those requirements clearly include the laying of
the relevant agreement before Parliament. The agreement is
As not to come into operation unless it is approved by a resolution
of Parliament”
Government’s • The SC explained that international business or economic
Bank transaction to which Government is a party must be submitted
to Parliament for approval, even though the nature of the
obligation embodied in such transaction is not one of debt.
• The SC traced the history of origin of this provision to the
1968 Proposals of the Constitution Commission which drafted
the 1969 Constitution, and then stated that its purpose was to
“ensure transparency, openness and Parliamentary consent in
relation to debt obligation contracted by the State.”