The Evolution of the Banking Industry Essay Example for Free

The Evolution of the Banking Industry Essay At independence, there were only two foreign banks, Barclays and Standard Chartered Banks that were dominant players in the country. Naturally, their operations were structured to support the colonial economy. Research indicates that the Bank of Gold Coast was later split into Ghana Commercial Bank and Bank of Ghana in 1957. In contrast to the existing Foreign Banks GCB was set up to provide banking services to a wider populace of Ghanaians and to support the development agenda of the indigenous government. Research indicates that the National Redemption Council, (military government) as part of its indigenization policy acquired 40% ownership in the two foreign banks but his did not change their business strategy. The main complaint against the foreign banks was that their lending policies were too conservative. During the PNDC era, two foreign banks were licensed that’s BCCI and meridian Biao. The BCCI collapsed in 1991 with a large foreign Exchange liability it could not manage. Meridian Biao almost collapsed in 1995 due to an imprudent foreign exchange exposure to its distressed parent company. After the return of democratic rule in 1992, two Malaysian Banks were licensed. The two were Metropolitan and Allied Bank and International Commercial Bank. Besides, a South African Bank, Stanbic Bank, was also licensed. The collapse of two Ghanaian banks, that’s Bank for Housing and Construction and Co-operative Bank confirmed that the financial sector required effective management of risks. The assurance was however that the new regulatory regime was more effective and so it was unlikely that such bank failure could occur again. Banks with foreign equity participation became stronger and more profitable by the year 1990. Financial experts have argued that the collapse of BCCI and near collapse of Meridian Biao raises question about how well foreign banks are insulated from the difficulties of their parent companies. An IMF study of the banking industry in 2003 stated that Ghana’s market structure was slightly less competitive than that of Nigeria and Kenya. Nigeria is however a huge economy as the economy of Ghana grows at a faster pace, private Foreign Direct Investment facilitated by Nigerian Banks may play a key role if well directed. Indications are that Ghana will become the financial hub of West Africa soon. Due to common historical experiences, Ghana appears to be a natural next step for Nigerian businesses seeking to expand their operations beyond Nigeria. Foreign Banks in Ghana include Barclays Bank, Standard Charted Bank SG-SSB, Ecobank Ghana Limited and UT Bank. Others are International Commercial Bank, Stanbic Bank, Standard Trust Bank, Zenith Bank and the Guaranty Trust Bank. The rest are Intercontinental Bank, Access Bank Ghana and Sahel Sahara Bank.