An Investment Banker and the Chief Executive Officer of EcoCapital Investment Limited, Mr Dela Agbo, has admonished Ghana’s financial service providers to stick to their core mandates. This will create a more efficient system, instead of the current system in which they compete with each other for the same funds.
He explained that Banks are mandated to receive savings and create investment products for their client. Whereas Investment Banks are licensed to identify investments product from the Banks, advice clients about them and then offer to manage such products on their behalf.
However, he said, the Ghanaian financial services sector is such that banking and investments firms turn to crisscross and trespass each other’s role or obligation in the industry for the placements of the same funds.
This practice, he warned, is not healthy for the financial sector in the country, adding that such practices are part of reasons which contributed to the mess in the financial industry which resulted in a cleanup exercise.
Differentiation in Financial services
More so, he added, at one point the only distinguishing feature amongst financial service providers, from investors view, was probably interest rates. Adding that the firm that is willing to offer the highest rates get the deposits or the investments.
Consequently, he said “I expect Investments banks to go back to being investments banks. And I expect our regulators, being the Security and Exchange Commission (SEC) and Bank of Ghana (BoG) to help all of us stick to our respective mandates”.
“Which means that banks need to stop saying that they are investment people. Regulators must continue the drive to disallow investment companies to sell fixed deposit (FD) to clients”, he further added.
Furthermore, the Investment Banker explained that FDs are bank products which ought to be sold or discussed to only the clients of a specific bank and not to the general public as being done in the country.
“It shouldn’t be a product that they should be marketed to the whole world, and say that we have a higher rate”.
Banking sector cleanup
In January, 2017, the BoG took the bold initiative to reform its ailing banking sector.
Consequently, it announced a recapitalisation programme with a requirements of GH¢230 million for banks, but the figure was further increased to GH¢400 million.
This resulted in the revocation of the licenses of some local banks. The banks have since gone under receivership.
Again, licenses of some 53 investments companies were revoked.
Mobile Money
With the exercise over, Mr Agbo said the regulators ought to ensure that the financial firms stick to the guidelines. Hence, the law states that without a SEC license a finance house cannot engage in investments dealings with the general public.
“If you have the SEC license then you can discuss investment with people, give them options, and advise them”.
“It’s very important that we all stick to this so that investment banks can now advise people and present the various fixed deposit products offered by the different banks to their clients. And then clients can make decisions based on one, depending on the risk and return analysis”, he said.
In addition to this, the Chief Executive Officer of the EcoCapital, bemoaned the situation where telecommunication firms have been allowed to render banking and insurance services to their subscribers through their mobile money platforms. Much as the emergence of this grand technology has aided financial services penetration and inclusion, they should be regulated in what they can do. One would only expect the mobile money platforms to facilitate transfer of funds to the appropriate licenced institution for the investment.
However, he stated that “the telecos are now into the finance and insurance sectors and if we don’t take care they will venture into the Investments sector and then there will be confusion all over the place. We need to empower each institution and let them stay in their lane and do what they are mandated to do and do it well”, he reiterated.
