The Bank of Ghana is revising its policies and guidelines that will make it easier for all banks to list on the Ghana Stock Exchange.
Governor of the Central Bank, Dr. Ernest Addison, in a speech read on his behalf at the launch of the Initial Public Offering (IPO) of Energy Commercial Bank, said the regulator will continue to encourage banks that want to list on the GSE to raise long-term capital to do so.
“Presently we have eight banks listed on the Ghana Stock Exchange and today’s launch will inch-up the number to nine, which represents 30percent of the regulated banks. Obviously, we still have a long way to go as we seek to help get our banks listed on the local exchange.
As regulators, we will continue to assist by revising our processes and do away with unnecessary hindrances when it comes to listing to help grow and support the vision of having sound and reputable capital market where institutions can source for funding,” he said.
The benefits of listing on the stock exchange are immense. They include: Elevating the market value of firms through improved transparency and integrity, liquidity, enhanced financial flexibility, reduction in cost of capital, investor protection, prestige and branding, as well as compliance to rules and regulations, among others.
Research, according to the Governor, has shown that companies become more efficient after getting listed through greater public scrutiny, which in the long term, benefit the business.
“Coupled with these benefits, there are studies to suggest a positive correlation between financial intermediation in the stock market and GDP. This makes capital market funding an important and welcome supplement not the least for financial institutions in the country,” he said.
He added that there is no doubt that capital markets perform important macroeconomic functions. “The increasingly important role of the capital market as a source of financing is a positive development, particularly as they diversify funding structures and make institutions less vulnerable to crises.”
The banks on the local bourse have raised and continue to raise significant capital. In 2018 alone, in major moves to meet the Central Bank’s stated capital, Access, Republic, and Societe Generale banks have raised close to GH¢700million. With Energy Commercial Bank seeking to raise at least GH¢340million, this will bring the total capital raised to GH¢1billion.
Reforms and corporate governance
The Governor noted that the financial sector reforms will be expedited to ensure that: “We are able to transform both banks and Specialised Deposit-Taking Institutions (SDIs) into strong financial institutions which are competitive and financially viable,” he said.
Dr. Addison, touching on the need for banks to adhere to good corporate governance, said the deposit taking business is one built on confidence and trust. “As we are all aware banks are highly leveraged institutions and as such can only be successful when lenders have full confidence that banks have the financial strength to meet its obligations as and when they fall due.”
He therefore called for improved corporate governance structures to protect depositors and shareholders in the course of intermediation. “Significant efforts have been made to improve corporate governance within the system by the issuance of Corporate Directive in March, 2018.”
He said that the guidelines will ensure improvements in micro infrastructures related to corporate governance, which is an important step to enhance the influence of financial institutions.
“We firmly believe that the adoption of these new corporate governance directives would translate into banks enjoying access to broad range of financing sources and at the same time lay a solid foundation for the rapid development of other financial products within the industry,” he added.