Ghana’s banks must “aggressively support” productive sectors

Transcript

Ghanaian regulators are taking a more robust stance with the country’s banking sector – but Daniel Asiedu, MD and CEO of Zenith Bank Ghana, says the industry is better off with the tougher rules. He explains the role banks must play to keep the country growing, and how Zenith Bank Ghana has repositioned itself in light ofthe new regulations.

World Finance: As regulators take a far more robust stance towards a Ghanian banking sector, an industry player tells us whether these changes are for the positive or negative. Daniel Asiedu of Zenith Bank Ghana joins me with his thoughts.

So, let’s first talk about economic growth prospects. We know that next quarter is going to bring a slowdown, right? So in the larger picture, tell me: where does the banking sector fit in?

Daniel Asiedu: When you look at the growth trend in the Ghanian economy up to 2013, 2013 closed at a growth rate of about 7.3 percent. Last year it dropped to four percent, and then this year it’s projected to close at 3.9 percent. So you could say that the economy’s growth has been sliding. And this has been attributable to inflation, depreciation of the cedi, and the energy crisis.

Having said that, of course, when you look at how growth has been projected – and next year we are looking at a growth rate of about 6.4 percent, and then that should rise to about 7.8 percent in 2017. Inflation currently is about 16.9 percent, and that has been projected to close the year at 12 percent, and then next year we are looking at a rate of about 10.2 percent.

And so, when you put all this together, you will see that the future looks bright. And as an industry, what role can we play?

What we have to do is to look at the productive sector and support it aggressively. We have to also look at the companies that are exporting, and also support them.

So this is a time that we – as a financial institution playing the intermediary role – must be visible in our support for the government, so the economy can be put on the growth path.

World Finance: Now in terms of government intervention, we know that regulation has been ramped up in your country, so tell me: how has that had an impact on the banking sector? Would you say a net positive or negative?

Daniel Asiedu: Basically, regulation all over the world has been stepped up; and our country has not been left out.

And that’s because we all know the impact or the implication of non-proper regulation: we know what’s happening in the world.

When you look at it from that perspective, you’ll agree with me that it’s made banking a bit tough. However, the net effect is that we are better off. Customers now have more confidence in the industry; the international community – especially correspondent banks – have a lot of confidence in us; the system is more transparent; and so you have nothing to worry about.

World Finance: So Daniel, you know: as these regulatory changes are implemented, your bank – any bank – is going to have to reposition itself. So how have you done that?

Daniel Asiedu: Let me start by saying that, as a bank, before even regulation was stepped up, we have been built on a culture of compliance and very strong controls.

You will see that most of the things we do are things that have been designed as a result of the experience we have acquired over time. So that whatever we do, we have in the back of our minds that we need to ensure that the system is quite tight.

In west Africa we’re the first bank to be licensed by Visa to do acquiring, and for Visa to give you that platform? It should tell you the comfort they have in your system.

We’ve had calls to partner with regulators – the Bank of Ghana – for some of the systems they intend to roll out. And when the National Risk Assessment Committee was set up, we as staff of Zenith Bank were nominated to represent the banking industry.

So, we think that we’re on the right path, because we’ve positioned the bank along those lines.

World Finance: OK, excellent. Now, of course, there’s always improvements that can be made. If you could speak directly to central bank governors, what other regulatory adjustments would you make?

Daniel Asiedu: You agree with me that the environment is quite turbulent, and things are changing. Nothing is dynamic. And so even though we may have system processes in place, we need to constantly update them.

I think that as we move along, and as events unfold, the regulators look at how things are done, and come up with other ways and better ways of ensuring that the system is better off.

So sitting here, I would not be able to – but I know the central bank will continue to work in the industry, in the interests of all players.

World Finance: OK – now, when you talk about optics when it comes to Africa as a whole – combatting terrorism is a sticky situation. Tell me, how can the banking sector see improvements be made in terms of how this issue is tackled?

Daniel Asiedu: Let me start by saying that I think we all need to realise that there is a problem. There is a problem with money laundering, there’s a problem with financing of terrorism. And we may not be experiencing it directly in Ghana, where I’m from, but all over the world it’s happening. And if action is not taken very soon, it’s going to affect us in our market.

And so the earlier we all position ourselves, the better. And I think as an industry we need to support the government; as an industry we need to be proactive; we need to appreciate what the government is doing. And so we must all have systems and processes to make sure that we support government to achieve this particular objective of ensuring that we stop from breaching the environment.

World Finance: OK. And are you instilled with confidence that this is indeed what will happen? That this sort of troubling period is one that the banking sector, the continent as a whole, will be able to eventually move on from?

Daniel Asiedu: We have an association – which incidentally I’m the treasurer of – and when we go for our meetings, these are some of the things we discuss.

It’s important that the industry positions itself to tackle some of these problems head-on, to support government. Government cannot do it alone. We are the players of the industry, and the government can only push it from the regulation point of view. We must implement – and it’s important that we support government.

World Finance: OK! Daniel, thank you so much for joining me today.

Daniel Asiedu: You’re welcome; thanks for having me here.