Restoration of Banking Licenses

One of the key issues raised in the acceptance speech of former President of Ghana, John Dramani Mahama, is the restoration of banking licenses that are considered to have been revoked unfairly a couple of years ago during the banking sector clean-up. The banking sector clean-up lacked characteristics and spirit of indigenization for local entrepreneurs in the industry. Thus, the possibility of resuscitating the banks whose licenses were revoked unduly will be reasonable.

But his promise tends to have political tendencies as the said banks were incorporated and operated under regulations. The promise to restore the banks who lost their authority documents to operate banking businesses only appears to be a political promise with limited authority. While the President of the Republic of Ghana holds significant power, the restoration of banking licenses involves intricate legal and regulatory frameworks. The revocation of banking licenses requires the same processes and procedures that were followed in their issuance. The authorities that issued the banking licenses might have applied the laws regulating the operation of banks in revoking the licenses.

The banks whose licenses were revoked have the opportunity to seek redress in the courts of Ghana. As legally-formed corporations, the banks cannot allow the authorities of the state to abuse them by illegally revoking their licenses. The court has the authority to resolve any difficulty with the issuance and revocation of licenses. The President of Ghana, even though plays a pivotal role in shaping policies that impact all sectors including the financial sector, has limited specific powers in restoring banking licenses.

The powers to appoint key regulatory officials and influence legislative processes cannot be discounted. The use of political powers to “bewitch” persons and their institutions, especially those considered to support opposite political parties in Ghana is real. Therefore, the President of the Republic of Ghana can use the powers available to him or her to harm or heal institutions (through the restoration of banking licenses). A President has much influence on the regulatory officials, through their appointments; so, he can have some degree of influence over the restoration of banking licenses.

Yet, the restoration of banking licenses is governed by legal and regulatory frameworks, which must be followed in the process. The Central Bank of Ghana, as the financial regulator, and other authorities within the financial sector are typically responsible for the granting, revoking, or suspension of a banking license. The decision to undertake any of these actions is based on a range of factors including compliance with prudential regulations, capital adequacy, risk management, and the ability to safeguard depositors’ funds. The constraints for restoring banking licenses are established by the regulatory frameworks.

The President has executive orders or directives to rely on to signal their support for the restoration of an institution’s banking license. The President can collaborate with regulatory bodies and lawmakers to initiate processes and procedures to investigate the revocation of licenses. There can also be the enacting of legislative changes that streamline the license restoration processes provided the new changes in statutes align well with the broader objectives of financial stability and the protection of depositors’ funds.

The restoration of the supposedly unfairly revoked banking licenses through the initiative of the President has political implications. It is a signal that the financial sector is exposed to political manipulations as well as the caprices of the political elites. It also indicates there is an opportunity for politicians to exert undue influence over regulatory apparatus that can potentially compromise the integrity of the financial system. But a decision by the President of Ghana to intervene in the process to revive local banks and restore jobs to the youth is necessary.

To strike a balance between political considerations and financial stability is crucial in this regard. The former President, if voted into power, has the option to use a judicial review process or a committee to investigate the nature and causes of the collapse of the local banks. The restoration of a banking license can, and must only be done through a legal process. The court will serve as the better arbiter in resolving the challenges associated with the issuance and revocation of banking licenses. Judges of the appropriate court to adjudicate on the matter can assess the fairness or otherwise of the revocation of the licenses by the issuer, the Central Bank of Ghana. The issue of restoration of the banking licenses requires legal prerequisites that uphold the principles of fairness and due process.

While the promise by former President John Mahama to restore the banking licenses of local entrepreneurs that were revoked undeservedly has political and social support, there is the need to investigate the banking sector clean-up exercise and the fundamental factors that led to the revocation of the licenses of the said banks. The regulator may be right in revoking the licenses of the said banks, and the desire to restore such licenses without technical considerations will not yield the much-needed solutions to create a sound sector.

Emmanuel Kwabena Wucharey
Economics Tutor, Advocate and Religion Enthusiast.