Spio-Gabrah kicks against EXIM Bank autonomy; Says it needs BoG’s supervision
The Minister of Trade and Industry (MoTI), Mr Ekow Spio-Gabrah, has kicked against attempts by Parliament and a Presidential special task force of bankers and entrepreneurs to insulate the Ghana Export-Import (EXIM) Bank from central bank guidelines on best practices (prudential norms), describing the proposal as a wrong decision that can have serious implications for the bank.
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Prudential norms are the guidelines and general norms issued by the regulating bank (the central bank) of the country for the proper and accountable functioning of bank and bank-like establishments, such as the EXIM Bank. In other words, the norms are the practices that all banks are expected to follow.
With the EXIM Bank expected to be capitalised with a blend of private and public funds, Dr Spio-Gabrah told the GRAPHIC BUSINESS in an interview that establishing it outside a regulatory framework, as was being proposed, would reduce the trust some partner institutions would have in its operati
"In the report (of the task force), which was used to develop the bill, the bank is presented as an unregulated bank, one not supervised by the Bank of Ghana, and it is not to be established under the Banking Act. I see that as a problem because there is a reason why we have a Banking Act that governs the operations of all financial institutions in the country," the minister said.
He explained; "What I am saying is that the bank should be set up within a regulatory framework because the EXIM Bank is not going to depend only on the government of Ghana money unless that is the plan.”.
Task force’s recommendation
Dr Spio-Gabrah's position is in sharp contrast to what the special taskforce set up by the President in February, last year, advised the government on the establishment of the EXIM Bank, a specialised institution dedicated to trade and development finance as well as the issuance of insurance and guarantees for credit to export-oriented institutions.
Drawing inspirations from laws establishing similar banks in other countries, the task force, led by the Chief Executive Officer of Treasury Warehouse Ghana Limited, Mr Steve Williams, recommended that the bank should be a statutory corporation owned 100 per cent by the government, be operationally independent but subject to policy direction by the finance minister and "be exempted from BoG prudential regulations, with supervision provided by the minister."
Additionally, the task force recommended in its 42-page report that the bank should operate outside the remit of the Banking (Amendment) Act, (2007), Act 673, which currently regulates the operations of financial institutions in the country.
"The Ghana EXIM Bank is being proposed as an independent institution capable of accessing funds within and outside Ghana using the strength of its balance sheet. Oversight responsibility in the operations of the bank will be vested in the Minister of Finance," the report added.
Dr Spio-Gabrah, however, sees those proposals as grounds that could limit the success rate of the Ghana EXIM Bank.
"Most EXIM Banks in the world have various relationships with other financial institutions, either in or outside the country and letters of credit (LCs) have to be established between that bank and other financial institutions. So if people think that the bank has no regulatory framework, then there will be a way in which they will respond to it and the bank may not be as successful as it could be," the minister said.
Meeting Parliament
As a result, the minister said he was preparing to meet the relevant Parliamentary Select Committee on the matter, with the hope of getting it to review the EXIM Bank bill and bring it under BoG regulations, similar to any other financial institution operating in the country.
Checks at Parliament showed that the bill is currently at the review stage after which it would proceed to reading to pave the way for its final passage into law.
Should the minister's request be heeded, it could bring the Ghana EXIM Bank under central bank regulation.
However, the EXIM Banks of Korea, Canada, Indonesia, India, Thailand and the United States of America are all independent of central bank controls, making it possible for their respective finance ministers to exercise oversight responsibilities over their operations.
The Finance Minister, Mr Seth Terkper, declined to comment on Dr Spio-Gabrah’s concerns. However, a highly placed source at the ministry emphasised that said they followed international best practice in setting up the Ghana EXIM.
“What we are doing is not different from what happens elsewhere. The autonomy does not mean that the bank will disregard prudential regulations. Knowing the Minister of Finance, I don’t think he will watch a finance institution disregard the rules,” the source said in a telephone interview.