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Financial Sector Supervision Strengthening & Consumer Protection in Ghana

Project Development Objective (PDO)

The objective of this project is to support the authorities in strengthening their capacity to promote a sounder, more stable financial sector.

Background

The government of Ghana and Bank of Ghana (BoG) have begun a series of reforms aimed at upgrading the regulatory and supervisory framework and building the capacity to supervise banks and other deposit-taking financial institutions. The government submitted to parliament two new bills—the Banking and SDI (Specialized Deposit-Taking Institutions) Bill and the Deposit Protection Bill—to address long-standing weaknesses in the financial sector. 

In addition, BoG is stepping up its oversight of the microfinance sector. More specifically, it is improving off-site monitoring and imposing sanctions against institutions that fail to submit prudential returns. It is also strengthening corporate governance standards and implementing the new minimum capital requirements with the goal to consolidate the sector. 

This project aims to support all of the efforts described above. In addition, BoG needs to build institutional capacity by upgrading staff skills and supervisory systems and tools, particularly for deposit-taking microfinance institutions (MFIs), which have been expanding with limited oversight. 

Activities

The project will support the following technical activities in three components:

Component 1: Strengthening bank regulation and supervision
This component will support the implementation of the Banking and SDI Bill. More specifically, the component will support (a) upgrading draft regulations in line with the Banking and SDI Bill and (b) developing a framework for the registration of financial holding companies. 

Component 2: Promoting a well-regulated microfinance sector
The supervisory manuals and regulatory framework in relation to the legal code for MFIs will be upgraded on the basis of the provisions of the Banking and SDI Bill currently before parliament. In addition, this component will support organizing workshops with supervisors, associations, and industry representatives on adopting new regulatory framework to implement the Banking and SDI Bill. 

Component 3: Building capacity for consumer protection  
This component will help assess (a) the Bank of Ghana’s Market Conduct Unit’s technical and capacity building needs, (b) the advisory recommendations for operationalizing market conduct supervision, and (c) the development of a tailored institution-building program. In addition, it will help implement the existing market conduct requirements and the rollout of the new requirements (that is, effective interest rate calculation). In addition, it will help develop supervision manuals and staff training. This component will also provide advice on designing and operationalizing ways to resolve disputes.

Expected Outcomes

The expected outcomes of the project are as follows:

1.  A better regulated and supervised banking sector because of the adoption of an upgraded and
     consistent regulatory framework and strengthened supervisory capacity

2.  A better regulated and supervised MFI sector because of the upgraded regulatory framework and
     strengthened supervisory capacity

3.  Adequate technical and operational tools for the Bank of Ghana Market Conduct Unit and the
     capacity for it to regulate and supervise market conduct in all licensed financial institutions