History of the bank of Ghana

History

Brief Historical Background
The Central Bank of Ghana traces its roots to the Bank of the Gold Coast (BCG), where it was nurtured. As soon as local politicians and economists saw political independence in sight in the mid 1950’s the agitation for a central bank was revived. It was argued that a central bank was one institution which would give true meaning to political independence. It may be recalled that way back in 1947 some leading politicians had called for the establishment of a national bank with central bank functions to act as banker to government and to cater for the indigenous sector of the economy.
Proposals of the advocates for a central bank were accepted and in early 1955 another Select Committee was set up by the Government to take a new look at the Trevor Report and prepare the grounds for the establishment of a central bank in Ghana. Fortunately, the BGC had already set the stage for central banking: all that was needed was specially trained personnel in central banking and suitable accommodation for the bank to take off.
By the end of 1956, all was set for the establishment of the Bank of Ghana. A new and modern five-storey building had been put up on the High Street, adjacent to the Accra Metropolitan Assembly (AMA) to house both the Bank of Ghana and the Ghana Commercial Bank (GCB).
The Establishment of Bank of Ghana, 1957
On the 4th March 1957, just two days before the declaration of political independence, the Bank of Ghana was formally established by the Bank of Ghana Ordinance (No. 34) of 1957, passed by the British Parliament. Frantic preparations then began to put in place an organisational structure for the new central bank. By the middle of July 1957, all was set for the official commissioning of the new Head Office of the Bank on the High Street.
In his opening address at the end of July 1957, the then Leader of Government Business (Prime Minister) stated with pleasure that the occasion marked the beginning of independent monetary administration in the newly independent Ghana – a cherished dream had at long last become a reality. The Leader of Government Business had put the aspiration of the country in establishing the central bank as follows: “In the modern world a central bank plays a very important and decisive role in the life of a country. It is essential to our own independence that we have a government-owned bank and that the central bank follows a policy designed to secure our economic independence and to further the general development of our country.”
The principal objects of the new central bank, as enshrined in the 1957 Ordinance, were “to issue and redeem bank notes and coins: to keep and use reserves and to influence the credit situation with a view to maintaining monetary stability in Ghana and the external value of the Ghana pound; and to act as banker and financial adviser to the Government.
The opening ceremony paved the way for the Bank to commence formal banking operations on 1st August 1957, when the Banking Department opened for business. The Issue Department did not commence operations until July 1958.
The [Bank of Ghana][1] has since 1957 undergone various legislative changes. The Bank of Ghana Ordinance (No.34) of 1957 was repealed by the Bank of Ghana Act (1963), Act 182. This Act was subsequently amended by the Bank of Ghana (Amendment Act) 1965, (Act 282).The Bank of Ghana Law, 1992 PNDCL 291 repealed Acts 182 and 282.
The current law under which the Bank operates is the Bank of Ghana Act, 2002 (Act 612)

Corporate Profile
The first Governor of the Bank was Mr. Alfred Eggleston, the former Managing Director of BGC and an accomplished Scottish banker on secondment to Ghana from the Imperial Bank of India. His Deputy Governor was one Mr. Douglas F. Stone, another renowned British central banker also on secondment from Bank of England.
The general administration of the Bank was entrusted in the hands of a seven-member board of directors under the Chairmanship of the Governor.
The first Board was as follows:
1. Alfred Eggleston Chairman
2. Douglas F. Stone Deputy Governor
3. R. S. Blay Director
4. Dr. N. T. Clerk Director
5. C. E. Osei Director
6. R. C. Parkin Director
7. Albert Adomako Secretary
The Governor of the Bank and his Deputy were appointed by the Governor of the Gold Coast on the recommendation of the Prime Minister, in accordance with Section 10(1) of the 1957 Ordinance. The Governor and his Deputy were each appointed for a term of five years and were eligible for reappointment. Those two officials were answerable to the Board for their acts and decisions in the course of general administration of the affairs of the Bank. The Board itself was also answerable to the Ministry of Finance for efficient management of the Bank. The other directors of the Board were also appointed by the Prime Minister with the approval of the Governor of the Gold Coast for a term of three years, subject to renewal.

The Bank commenced business with six main departments namely:
• The Governors’ Office
• The Administration/Personnel Department
• The Banking Department
• The Issue Department
• Accounts/Audit Department
• Economics/Statistics Department
The Governors’ Office was headed by the Secretary to the Board while the other departments were headed by Managers who reported directly to the Deputy Governor or, in special cases to the Governor. The departments were run by the managers in accordance with policies and decisions arrived at by an in-house Management accordance with policies arrived at by an in-house Management Committee comprising the Governor, the Deputy Governor and three or four heads of department appointed by the Governor.

With that initial organisational arrangements, the Bank of Ghana assumed its central role in the banking system of Ghana, which then comprised the central bank, two expatriate commercial banks – the British Bank of West Africa (BBWA) (now Standard Chartered Bank) and Barclays Bank Limited (Dominion, Colonial and Overseas); and the new Ghana Commercial Bank (GCB).

There was also the Post Office Savings Bank (POSB), which was, in fact, not a bank by definition; it was only an institution set up by the government to mobilise public savings through the agency of the numerous post offices in the country, for investment in government paper

List of banks in Ghana And Location

1. Access Bank Ghana
2. African Investment Bank
3. Agricultural Development Bank of Ghana
4. AmalBank
5. Barclays Bank
6. CAL Bank
7. Ecobank Ghana
8. Fidelity Bank (Ghana)
9. Bank of Ghana
10. First Atlantic Merchant Bank Ghana (FAMBG)
11. Ghana Commercial Bank
12. Guaranty Trust Bank (Ghana)
13. HFC Bank
14. Intercontinental Bank (Ghana)
15. Northern City Bank (Ghana)
16. International Commercial Bank
17. Merchant Bank Ghana Limited (MBG)
18. National Investment Bank
19. Prudential Bank Limited
20. Société Générale - Social Security Bank (SG-SSB)
21. Stanbic Bank
22. Standard Chartered Bank
23. Trust Bank
24. UniBank
25. United Bank for Africa
26. UT Bank^[2]
27. Zenith Bank

Ghana currency

One of the most pressing economic problems faced by all postindependence Ghanaian governments was the overvaluation of the currency. The unit of currency is the cedi, which is divided into 100 pesewas. In 1961 Ghana broke with the British pound sterling and pegged the value of the cedi to the US dollar. As Ghana's terms of trade worsened in the 1960s, the real value of the cedi fell; however, successive governments feared either to float the cedi or to adjust its value, thereby raising the cost of imports and consumer prices. The overthrow of the Busia regime in 1971, following the introduction of a devaluation package, reinforced the unpopularity of such a move. The Acheampong government reversed course and revalued the cedi. It also increased the money supply to pay Ghana's debts, leading to a sharp divergence between the official and the real rates of exchange.
The overvalued cedi, on the one hand, and low, regulated prices for commodities, on the other, led to a robust smuggling industry and to an extensive black market in currency. It became common practice for Ghanaians, especially those living along the country's border, to smuggle Ghanaian produce such as cocoa and minerals into neighboring francophone countries. After selling on the local market, Ghanaians would then return home and trade their hardcurrency Central African francs for cedis on the black market, making handsome profits. Smuggling and illegal currency operations had become so extensive by 1981 that the black market rate for cedis was 9.6 times higher than the official rate, up from 1.3 in 1972. At the same time, reliable estimates placed transactions in the parallel economy at fully one-third of Ghana's GDP.
Fifteen months after the PNDC came to power, in April 1983, the government began efforts to devalue the cedi. Rawlings introduced a system of surcharges on imports and bonuses on exports that effectively devalued the currency, because the surcharges on imports amounted to 750 percent of the amount being spent, and the discounts on exports amounted to 990 percent. Further, an official devaluation began in October 1983 in which the exchange rate reached ¢90 to US$1 by March 1986. By 1993 ¢720 equaled US$1, and by late 1994, ¢1,023 equaled US$1.
In September 1986, the government sought alternative methods for establishing the value of the cedi. At that time, the government relinquished its direct role in determining the exchange rate. The rate was instead determined at regular currency auctions under the pressure of market forces on the basis of a two-tier exchange-rate system, with one rate for essentials and another for non-essentials. In April 1987, the two auctions were unified. In subsequent reforms also designed to diminish smuggling and illegal currency dealings, private foreign-exchange bureaus were permitted to trade in foreign currencies beginning at the end of March 1988. By July 1989, there were 148 such bureaus operating, ninety-nine in Accra and thirty in Ashanti Region, with the remainder in other urban centers.
In 1987 US$207 million was allocated through the auction; and in 1988, US$267 million. By comparison, the foreign-exchange bureaus in the first year of operation, ending in March 1989, traded US$77 million worth of foreign currency, or about one-fourth the amount of foreign exchange allocated through the auction. Initially, prices at the auction and those at the foreign-exchange bureaus differed greatly. Efforts to reduce the difference, however, brought the gap from 29 percent in March 1988 to approximately 6 percent by February 1991. In early 1992, the auction was closed, although no official announcement was given. Purchasers were referred to the Bank of Ghana, which used an exchange rate determined largely on the basis of market forces.
The government also successfully slowed growth in the money supply. In the late 1980s, the average annual growth rate reached 61 percent. By 1990 it had dropped to 13.3 percent but then accelerated slightly to 16.7 percent, standing at ¢317 million the following year. In 1991 the Bank of Ghana introduced a ¢1,000 note, the highest denomination issued since independence in 1957. Previously, the highest denomination had been ¢500. A total of ¢50 billion of the new notes was printed.

banking history of ghana

Ghana has a well-developed banking system that was used extensively by previous governments to finance attempts to develop the local economy. By the late 1980s, the banks had suffered substantial losses from a number of bad loans in their portfolios. In addition, cedi depreciation had raised the banks' external liabilities. In order to strengthen the banking sector, the government in 1988 initiated comprehensive reforms. In particular, the amended banking law of August 1989 required banks to maintain a minimum capital base equivalent to 6 percent of net assets adjusted for risk and to establish uniform accounting and auditing standards. The law also introduced limits on risk exposure to single borrowers and sectors. These measures strengthened central bank supervision, improved the regulatory framework, and gradually improved resource mobilization and credit allocation.
Other efforts were made to ease the accumulated burden of bad loans on the banks in the late 1980s. In 1989 the Bank of Ghana issued temporary promissory notes to replace non-performing loans and other government-guaranteed obligations to state-owned enterprises as of the end of 1988 and on private-sector loans in 1989. The latter were then replaced by interest-bearing bonds from the Bank of Ghana or were offset against debts to the bank. Effectively, the government stepped in and repaid the loans. By late 1989, some ¢62 billion worth of non-performing assets had been offset or replaced by central bank bonds totaling about ¢47 billion.
In the early 1990s, the banking system included the central bank (the Bank of Ghana), three large commercial banks (Ghana Commercial Bank, Barclays Bank of Ghana, and Standard Chartered Bank of Ghana), and seven secondary banks. Three merchant banks specialized in corporate finance, advisory services, and money and capital market activities: Merchant Bank, Ecobank Ghana, and Continental Acceptances; the latter two were both established in 1990. These and the commercial banks placed short-term deposits with two discount houses set up to enhance the development of Ghana's domestic money market: Consolidated Discount House and Securities Discount House, established in November 1987 and June 1991, respectively. At the bottom of the tier were 100 rural banks, which accounted for only 5 percent of the banking system's total assets.
By the end of 1990, banks were able to meet the new capital adequacy requirements. In addition, the government announced the establishment of the First Finance Company in 1991 to help distressed but potentially viable companies to recapitalize. The company was established as part of the financial sector adjustment program in response to requests for easier access to credit for companies hit by ERP policies. The company was a joint venture between the Bank of Ghana and the Social Security and National Insurance Trust.
Despite offering some of the highest lending rates in West Africa, Ghana's banks enjoyed increased business in the early 1990s because of high deposit rates. The Bank of Ghana raised its re discount rate in stages to around 35 percent by mid-1991, driving money market and commercial bank interest rates well above the rate of inflation, thus making real interest rates substantially positive. As inflation decelerated over the year, the re discount rate was lowered in stages to 20 percent, bringing lending rates down accordingly.
At the same time, more money moved into the banking system in 1991 than in 1990; time and savings deposits grew by 45 percent to ¢94.6 billion and demand deposits rose to ¢118.7 billion. Loans also rose, with banks' claims on the private sector up by 24.1 percent, to ¢117.4 billion. Banks' claims on the central government continued to shrink in 1991, falling to a mere ¢860 million from ¢2.95 billion in 1990, a reflection of continued budget surpluses. Claims on non financial public enterprises rose by 12.6 percent to ¢27.1 billion.
Foreign bank accounts, which were frozen shortly after the PNDC came to power, have been permitted since mid-1985, in a move to increase local supplies of foreign exchange. Foreign currency accounts may be held in any of seven authorized banks, with interest exempt from Ghanaian tax and with transfers abroad free from foreign exchange control restrictions. Foreign exchange earnings from exports, however, are specifically excluded from these arrangements.
The Ghana Stock Exchange began operations in November 1990, with twelve companies considered to be the best performers in the country. Although there were stringent minimum investment criteria for registration on the exchange, the government hoped that share ownership would encourage the formation of new companies and would increase savings and investment. After only one month in operation, however, the exchange lost a major French affiliate, which reduced the starting market capitalization to about US$92.5 million.
By the end of 1990, the aggregate effect of price and volume movements had resulted in a further 10.8 percent decrease in market capitalization. Trading steadily increased, however, and by mid July 1992, 2.8 million shares were being traded with a value of ¢233 million, up from 1.7 million shares with a value of ¢145 million in November 1991. The market continued to be small, listing only thirteen companies, more than half in retailing and brewing. In June 1993, Accra removed exchange control restrictions and gave permission to non-resident Ghanaians and foreigners to invest on the exchange without prior approval from the Bank of Ghana. In April 1994, the exchange received a considerable boost after the government sold part of its holdings in Ashanti Goldfields Corporation.