Dr Raziel Obeng-Okon, a Senior Lecturer of the Ghana Institute of Management and Public Administration (GIMPA) noted that to ensure bank sustainability, banks must align their good corporate governance concepts with corporate objectives.Dr Obeng-Okon, who is also the Executive Chairman, Cidan Investment Group, was speaking at the Chartered Institute of Credit Management (Ghana) 2018 National Credit Management Conference/Induction and Award of Fellows ceremony in Accra.

It was on the theme: “The Impact of Corporate Governance on Effective Credit Risk Management in the Finance Sector.” During the ceremony 16 members of the Institute were given certificates as Associate Members, 13 were named as fellows whiles Mr Cudjoe Awudi, Acting Director in charge of Corporate Planning, Monitoring and Evaluation, Forestry Commission was given an honorary award.

Dr Obeng-Okon said it was important for Boards of financial institutions to see it as a duty to abide by sound governance standards by tightening international audit Control systems to flash out fraudulent practices.

"The boards of financial Institutions should have formal written down conduct of interest and objectives compliance to implement policies.The position of board chairman and managing directors or Chief Executives should be separated. No individual should have unfettered powers in decision making process,” he stressed.

According to him, some Credit Managers of some financial institution approved loans because some of their customers were their friends and relations, adding that, the interest of banks should go be beyond friendship.

According to him a Bank of Ghana (BoG) Supervisory Report have shown that; “some banks and deposit taking institutions lacked good corporate governance structure and what is more worrying is the co-mingling of board members and management responsibilities and that undermine credit and risk management.”

According to him, the report further suggested that: “some owners of banks and related executives and non executive directors consistently breached related party transaction limit of BoG by extending significant amounts of credits to themselves and relations.”    

In addition, Dr Obeng-Okon said in some instances, some executives approved fictitious placements with other related and connected companies.  The Executive Chairman of Cidan Investment Group suggested that there should be disclosures and transparency and adherence to strict professional ethics.

Dr Obeng-Okon urged banks to avoid inter related party transactions and employee fraud.

 The Senior Lecturer was not happy with the lack of effective internal control systems in some banks and noted that such practice sometimes encouraged employee fraud. He explained that some banks were suffering because of employee fraud and attributed that to the increase sophisticated technology.

“These days some bank employees are creating accounts for people and allow strangers to withdraw these monies. Some banks also polish their financial statement nicely and their balance sheets do not reflect the true state of affairs,” he noted.

Dr Obeng-Okon appealed to Accountants in the financial sector to report accurately.

On non-performing loans, Dr Obeng-Okon said a BoG Quarterly Bulletin recorded GH¢ 6.16 billion cedis whereas in 2017, GH¢8.56 billion cedis were recorded.  The Senior Lecturer noted that non- performing loans have had rippling effects on the economy because “it pushes banks to shrink credit to the private sector thereby reducing productivity.”

He said “total credit for the banking sector has increased by 18.3 per cent to 35.6 billion in the year 2016 but the growth in credit has reduced to 5.9 per cent by the end 2017.”   “The lower credit growth reflects the efforts of managers of the banking system to streamline their balance sheet by addressing the high non performing loans,” he explained.

According to him the non performing loans were a threat to depositors, adding that, the practice was eroding public confidence and effort in promoting financial inclusion.  He recommended the use of comprehensive and implementable credit policies, and effective use of internal control systems to save financial institutions.

Prof. Edward Marfo-Yiadom, Vice Chairman, Chartered Institute of Credit Management (Ghana) attributed recent happenings in the banking sector to bad corporate governance.   Prof Marfo-Yiadom noted that matters relating to credit were gaining prominence and it was important that professionals put their expertise to bear to make impact in the country and beyond.