or revocation of a licence under specified conditions and other prohibitive actions.
Part 2 covers clauses 11 to 18 and deals with Capital, Liquidity and other requirements. It covers issues on the initial and the minimum prudential requirements regarding core capital, liquidity, among others to ensure safety and soundness in the non-bank financial institutions. The Part also deals with related-party transactions and provide for additional safeguards for lending to members of staff and other related-parties. Under this part, provisions are made to cover the payment of dividends.
Part 3 consist of clauses 19 to 23 and it covers ownership and corporate governance issues. Other matters dealt with in this part include mergers, amalgamations, and sale of assets. It also covers the appointment and qualification of directors and employees of non-bank financial institutions.
Part 4 covers clauses 24 to 30. It deals with issues relating to Accounts and Financial statements. The Bill provides for accounting and auditing of non-bank financial institutions in accordance with the Companies Act, 1963 (Act 179) as well as International Accounting Standards and any other requirements that the Bank of ghana may specify from time to time. The part also provides for internal audit functions. It further deals with audited financial statements and requires them to be sent to the Bank of ghana not later than three months.
Powers of supervision and control is captured in clauses 31 to 37 as Part 5. This Part spells out the powers of supervision and control that the Bank of ghana has under the Bill. It also provides for the power of Bank of ghana or its agent to receive returns periodically from the non-
bank financial institutions. The Bank is also empowered to inspect the books of accounts of the institutions under the Bill.
Part 6 is made up of clauses 38 and 39 and it covers liquidation of non-bank financial institutions and the procedures involved.
The last part is Part 7 and it is made up of clauses 40 to 47. This Part covers miscellaneous matters and it includes:
Immunity issues;
Know your customer;
Repeals and savings;
Regulations; among others.
The Bill additionally has four Sche- dules.
4.0 Observations and Recommendations
The Committee observed that the existing Financial Institutions (Non- Banking) Act, 1993 (PNDCL 328) was promulgated in 1993 to regulate certain categories of institutions designated as non-bank financial institutions (NBFI). These institutions were the:
Discount Houses
Finance Houses
Acceptance Houses
Building Societies
Leas ing and Hi re -Purchase Companies
Venture Capital Funding Companies
Mortgage Financing Companies
Savings and Loans Companies
Credit Unions.
However, due to current developments in the non-banking financial institutions industry, there is the need for the Act to be reviewed.
The Committee was informed that as part of the review, the Bill seeks to promote consistency in the regulation of deposit-taking non-bank financial institutions on one hand and the banks on the other.
The technical team also informed the Committee that the current law (PNDCL 328) did not distinguish between deposit- taking institutions and non-deposit-taking institutions. This has led to regulatory arbitrariness thereby making regulating the sector very difficult.
This Bill clearly makes the distinction to facilitate effective and efficient re- gulation of these institutions.
The Deputy governor of the Bank of ghana informed the Committee that the Bill contains proposals for a new re-gulatory framework for the non-bank financial institutions with the object of improving the efficiency of regulation and enhancing the role of these institutions in the mobilization and allocation of funds to productive sectors of the economy.
The Committee noted that the Bill adopts a risk-based approach to regulation to ensure that the burden of regulation on NBFI is commensurate with the risks they pose to the overall financial system.
The Committee further noted that the Bill seeks to:
( a ) a b o l i s h D i s c o u n t
Houses, Acceptance Houses and Building Society licenses
(b) regulate only non-deposit- taking non-bank financial activity; and
(c) migrate deposit-taking non- bank financial institutions to the formal banking regime.
The Committee observed that the Bill provides the regulatory framework required for the effective regulation of NBFIs in order to improve their per- formance and enhance their growth.
Amendments Proposed
The Committee proposes the following amendments to the Bill:
( i ) C l a u s e 3 - - amendment p roposed -- paragraph (b), line 2, delete “section” and insert “sections”.
( i i ) C l a u s e 3 - - amendment p roposed -- paragraph (c), at end, delete “14” and insert “12”.
( i i i ) C l a u s e 4 - - amendment proposed -- subclause (1)(a), delete “Bank of ghana” and insert “Bank” and wherever it appears in the Bill.
( i v ) C l a u s e 5 - - amendment proposed -- subclause (1), line 2, delete “section 6 of this Act” and insert “section 4”.
( v ) C l a u s e 5 - - amendment proposed -- subclause (1), paragraph (b), line 1, delete “condition” and insert “status”.
( v i ) C l a u s e 5 - - a m e n d m e n t p r o p o s e d
[NII MANTE] [NII MANTE]
-- subclause (2), line 5, d e l e t e “ p r e s c r i b e d ” a n d insert “specified”.
(vii) Clause 6 -- amendment proposed -- line 1, after “display” delete “a” and insert “the”.
(viii) C l a u s e 9 - - amendment p roposed -- Headnote, delete and insert “Branches and Agencies”.
( i x ) C l a u s e 9 - - amendment proposed -- subclause (1), line 1, delete “licenced non-bank financial institution” and insert “non- bank financial institution” and wherever it appears in the Bill.
( x ) C l a u s e 1 0 - amendment proposed -- subclause (1), line 1, insert “written” before “approval”.
( x i ) C l a u s e 1 1 - - amendment proposed -- subclause (3), delete.
( x i i ) C l a u s e 1 5 - - amendment p roposed -- subclause (1), line 1, delete “non- deposit taking” and wherever it appears in the Bill.
( x i i i ) C l a u s e 1 5 - - amendment proposed -- subclause (1), line 2, delete “take” and insert “assume”.
( x i v ) C l a u s e 1 5 - - amendment p roposed -- subclause (1) (d), line 1, delete “the”.
( x v ) C l a u s e 1 6 - - amendment proposed -- subclause (2), line 2, delete “or
section 15”.
( x v i ) C l a u s e 1 7 - - amendment p roposed -- subclause (1), line 2, after “officers” insert “and”.
(xvii) Clause 19 -- amendment pro- posed -- paragraph (d), line 2, at end -- delete “of competent jurisdiction” and wherever it appears in the Bill.
( x v i i i ) C l a u s e 2 0 - - amendment proposed -- subclause (2) (a) line 3, delete “in ghana” and insert “in the country” and wherever it appears in the Bill.
( x i x ) C l a u s e 2 3 - - amendment proposed -- delete and insert the following:
“23. (1) the board of directors of a non-bank financial institution shall ensure that:
(a) management is in full control of the affairs and business operations of the institution;
(b) the business of the institution is conducted in a safe and sound manner;
(c) the internal controls systems, and manage- ment information systems of the institution:
(i) provide reasonable assurance of the in- tegrity and reliability of the financial state- ments of the institu- tion;
(ii) adequately verify, safeguard and main- tain accountability
of the assets of the institution based on established and writ- ten policies and pro- cedures;
(d) the policies and pro- cedures are implemented by trained and skilled officers with an appro- priate segregation of duties which are conti- nuously monitored, re- viewed and updated by the board of directors so that no mater ia l break-down occurs in the functioning of the con-trols, procedures and systems;
(e) the institution or operator is in compliance with all applicable laws.
(2) the board shall promote good corporate gover- nance and efficient per- formance of the institu- tion and report to the shareholders on all its activities at the annual general meeting of the institution.
(xx) Clause 26 -- amendment pro- posed -- subclause (1), line 2, delete“account books” and insert “books of accounts”.
(xxi) Clause 26 -- amendment pro- posed -- subclause (2) (a), line 1, after “Accountants” insert “established”.
(xxii) Clause 28 -- amendment pro- posed -- paragraph (a),
delete “ubmit” and insert “submit”.
(xxiii) Clause 35 -- amendment pro- posed -- paragraph (c), at end add “by the Bank”.
(xxiv) Clause 36 -- amendment pro- posed -- subclause (1), line 3, delete “37” and insert “35”.
( x x v ) C l a u s e 3 6 - - amendment proposed -- subclause (2), line 1, after “Bank”, insert “under subsection
(1)”.
( x x v i ) C l a u s e 3 7 - - amendment proposed -- subclause (1), line 2, after “services” insert “which are” and delete “but”.
( x x v i i ) C l a u s e 3 7 - - amendment proposed -- subclause (2). delete and insert the following:
“(2) A person who fai ls or neglects to comply with the orders commits an offence under this Act and is liable on summary conviction to a fine of one thousand penalty units or a term of imprisonment of not less than twelve months and where the offence continues after conviction to a fine of not less than two thousand penalty units on each day the offence continues.”
( x x v i i i ) C l a u s e 3 8 - - amendment proposed -- subclause (2), line 1, delete “Bank of ghana shall” and insert “Minister may, in consul- tation with the Bank”.
(xxix) C l a u s e 3 8 - - amendment proposed -- subclause (3), line 1, after
“Bank”, insert “under this section”.
( x x x ) C l a u s e 4 0 - - amendment proposed -- Headnote, delete and insert “Protection of Officers”.
( x x x i C l a u s e 4 0 - - amendment proposed -- insert a new subclause (2) as follows: “ ( 2 ) S u b s e c t i o n ( 1 ) i s
not applicable where the action or claim arises out of negligence.”
( x x x i i ) C l a u s e 4 2 - - amendment proposed -- paragraph (b), line 3, delete “an” on first occurrence and insert “any”.
( x x x i i i ) C l a u s e 4 3 - - amendment proposed -- subclause (1), line 2, delete “every” and insert “each”.
( x x x i v ) C l a u s e 4 4 - - amendment proposed -- Headnote, delete and insert “Notices”.
( x x x v ) C l a u s e 4 4 - - amendment proposed -- subclause (1), delete and insert the following:
“44. (1) Unless otherwise provided, the Bank may issue notices for anything required or authorised to be provided for under this Act by the Bank.”
( x x x v i ) C l a u s e 4 4 - - amendment proposed -- subclause (2)(b) line 3, delete “coming into force” and insert “com- mencement”.
( x x x v i i ) C l a u s e 4 4 - - amendment proposed -- subclause (3), delete and insert the following:
“44. (3) Except otherwise provided under this Act, failure to comply with a notice issued by the Bank shall attract administrative penal-ties specified by the Bank including revocation or sus-pension of licences.”
( x x x v i i i ) C l a u s e 4 6 - amendment proposed - line 1, delete “on the advice of the Bank of ghana shall” and insert “in consultation with the Bank may”.
( x x x i x ) C l a u s e 4 7 - - amendment proposed -- Inter- pretations, delete the following definitions:
“common bond institution”
“demand deposits”
“deposits from the public”
“financial system”
“non-prudential regulations”
“off-balance sheet items”
( x i ) C l a u s e 4 7 - - amendment proposed -- add the following definitions:
“ B a n k ” m e a n s “ B a n k of ghana”.
(xii) The Committee proposes a new clause as follows:
Transitional provisions
“48. On the coming into force of this
Act, the Financial Institutions specified in the Second and third Schedules shall be reclassified and regulated as specified under those Schedules”
( x l i i ) F i r s t S c h e d u l e - - amendment proposed -- Headnote -- delete and insert “(Sections 2 and 4)”.
(x l i i i ) F i r s t Schedu le -- amendment proposed -- item 7, after “from” delete “to time” and insert “time to time by notice”.
( x l i v ) S e c o n d S c h e d u l e -- amendment proposed -- Headnote, delete and insert “Sections 44 (2), 45
(3) & 48”.
( x l v ) T h i r d S c h e d u l e -- amendment proposed -- Head note, delete and insert “(Section 48)”.
( x l v i ) T h i r d S c h e d u l e -- amendment proposed - - l i n e 1 , d e l e t e “Previously Regulated” and insert “previously regulated”.
( x l v i i ) F o u r t h S c h e d u l e -- amendment proposed -- d e l e t e and i n se r t the following:
5.0 Conclusion
The Committee recommends to the House to adopt this report and pass the Non-Bank Financial Institutions Bill subject to the amendments proposed.
Respectfully submitted.
