Section 2 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (ACT 930) makes the Companies Act 1963 (ACT 179) applicable to banks but adds that where there is a conflict or inconsistency between the two, the former shall prevail.
Section 9(b) of Act 930 provides that the Bank of Ghana (BoG) shall not issue a licence to a bank whose proposed directors are not “fit and proper persons”, as defined under the act.
Under Section 33, every director is personally liable to pay a penalty of 500 penalty units (GH¢12 per unit) to the BoG for the bank’s non-compliance with the minimum capital adequacy ratio.
The same penalty applies to a director of a bank that makes a declaration or payment of dividends in contravention of Section 35 unless that director can show that she was not complicit.
If a bank fails to comply with liquidity requirements, a director is liable to pay a daily penalty under Section 40.
Section 57 imposes on a director a duty to report in writing certain shortcomings or infractions first to the board of directors as a whole and then to the BoG.
A non-complying director or the entire board may be considered as not being “fit and proper persons” and liable to pay up to 500 penalty units.
If a person acts as a director of a bank, in violation of the disqualification criteria under Section 58, unless excused by listed exemptions, that person is liable to pay a penalty of 1,000 penalty units.
Under Section 60, a bank cannot appoint or elect a director without the prior written notice and subsequent approval of the BoG. The BoG can direct the removal of a director for not being a fit and proper person, after giving the bank a hearing.
Section 61 prohibits advances, loans or credit facilities against the shares of the bank, its financial holding company or subsidiary. Beyond making such a transaction void, a director who violates this provision is liable to pay a penalty of 2,500 penalty units.
Section 67 restricts financial exposures to an insider and makes the board of directors the sole authority to approve and sanction a financial exposure of the bank to a related party.
Section 69 restricts lending to staff and excludes executive directors from the list of employees for that purpose.
Under Section 70, it is the directors of the bank at a duly constituted meeting who shall approve lending to insiders and their related interests.
Management is required to report such exposures to the directors and then to the BoG.
Under Section 80, the directors are required to approve the financial statements of the bank and at least two of them shall sign the statement unless otherwise directed by the BoG.
After an examination or based on information, including unsafe and unsound practices and acting in a manner detrimental to the interests of depositors and creditors, the BoG may remove any or all of the directors of the bank under Section 102.
It may also restrict their powers or the payment of excessive bonuses to them.
Directors may suffer further remedial measures, including reimbursement or direct dismissal and all other sanctions that a “relevant person” may suffer under Section 103. Where a criminal case against a director is dismissed or the director is acquitted, the BoG may still take authorised enforcement action against the director.
Section 151 provides that where a director fails to pay an administrative penalty within 60 days of demand, that director may be sued personally for purposes of recovery.
Under Section 152, the Attorney-General can, by executive instrument, authorise an officer of the BoG to prosecute offences under the act.
Unless a director can show that an offence was not committed with her consent and connivance and that she took steps to prevent the commission of the offence, every director shall be deemed to have committed an offence for which the whole board is convicted.
Under Section 154, if a director commits an offence under the act, whose penalty is not defined, upon summary conviction, she may be liable to pay between 500 and 2000 penalty units, serve between six months and two years in prison or both.
Corporate Governance Directive 2018
While Section 56 of Act 930 gives the BoG the power to prescribe corporate governance rules for banks, it is Section 92 which gives the BoG the power to issue directives to, among others, give effect to the act.
In exercise of this power, the BoG issued the directives in 2018.
The directive defines concepts such as corporate governance from a banking industry perspective, duty of care, duty of loyalty, executive director, non-executive director, “independent director” etc.
It unambiguously gives the board of directors the overall responsibility for the bank, including approving and overseeing the implementation of strategic objectives, risk strategy, corporate governance and corporate values.
The directors are also mandated to provide oversight of senior management. The responsibilities are required to be set out in a formal charter.
Board membership is required to reflect a blend of backgrounds in banking, law, finance, accounting, economics, corporate governance, business administration etc.
The board must have between five and 13 members, majority of whom must be independent and non-executive.
With the exception of the Chief Executive Officer (CEO) who can serve a maximum of 12 years, which could be three terms of four years each, the directors can only serve a maximum of nine years of three terms of three years each.
Former directors can serve as CEOs but for a maximum of 15 years, including the previous years served as director.
The positions of board chair and CEO are not to be held by one person and a Ghanaian must hold one of the positions.
The board chair must be independent and non-executive, ordinarily resident in Ghana unless excused by the BoG.
“The chairperson shall provide leadership to the board and ensure that board decisions are taken on a sound and well-informed basis”.
The board chair must, among other things, promote checks and balances in the governance structure and shall not serve as chair of a sub-committee although she can serve on one sub-committee.
The chair also recommends the removal of other directors for non-performance subject to shareholder approval.
The board must meet at least once every quarter. A director must attend at least fifty per cent of all meetings to qualify for re-election.
Teleconference attendance is good enough as long as the director participates in the whole meeting.
Boards must submit reports in writing on summary financial statements, performance review, non-performing loans, nostro accounts etc.
Boards must also conduct performance evaluation and present the report to the BoG on the 30th of June every year.
They must have at least two sub-committees (audit and risk) and both must be chaired by independent directors.
In addition, the audit committee must comprise independent directors only.
At least 30 per cent of the members of both committees must be ordinarily resident Ghanaians.
Other committees such as remuneration, nominations/human resource/governance and ethics/compliance may also be set up and they must be chaired by non-executive directors.
Conflict of interest and cooling-off periods are also provided for. The appendices also make further provisions on risk and oversight.