This study examines the causes and remedial measures of the ongoing banking
crises in Ghana using cross-sectional survey research. The respondent agreed
that the bank-specific causes include poor corporate governance practices,
severe capital impairment, severe liquidity impairment, high non-performing
loan ratio, low profitability levels and small bank size. They also agreed that
the banking industry-specific causes include poor banking regulation and
supervision, high Treasury bill rate and high Ghana reference rate. We also find
that both bank size and profitability were statistically insignificant. The multiple
econometric regression analysis depicts profitability, liquidity risk, Treasury bill
rate and banking regulation and supervision to have no significant effect on
changes in the overall level of satisfaction of the respondents. Important policy
implication for the continuous implementation of the capital requirement,
corporate governance, fit-and-proper, and enterprise risk management directives,
inter-alia are encouraged.
The transition to a stable and efficient banking industry has been a very long and
laborious process in Ghana over the past two decades, and this is still ongoing.
The legal framework for universal banking in Ghana was established in 2003
and that led to a massive improvement in the number of banks operating in the
country, particularly the influx of many foreign banks into the local banking
space. Several other reforms after the promulgation of the universal banking
laws in Ghana in the early 2000s have been enacted by the Bank of Ghana
(BOG) in a bid to make the system more vibrant and stable. However, the
banking industry in Ghana, despite the many banking reforms, continued to
be plagued with solvency challenges, poor corporate governance practices,
weak risk management practices, liquidity challenges, and incessant regulatory
breaches (Bank of Ghana, 2018). These challenges, according to the BoG, largely
contributed to the ongoing banking crisis in Ghana. Some banking experts,
however, attribute the banking crisis to the shallowness of the sector. Others
attribute the ongoing crisis to technical, cost, profit, scale, etc. inefficiencies in
the Ghanaian banking sector (Bank of Ghana, 2019b; Kamason, 2020).
Good