The Bank of Ghana (BoG) will begin scrutinising the compensation packages of chief executive officers (CEOs) and key management personnel of banks in a bid to ensure that the banks’ operational costs are not passed on to customers.
Close scrutiny is also expected to be applied to the remuneration of bank directors.
These are part of a raft of measures to align compensation packages to the overall performance of the banks.
The Governor of the Bank of Ghana, Dr Ernest Addison, who announced this at the 91st Monetary Policy Committee (MPC) news conference in Accra on Monday (November 25), indicated that the measures would help foster more competition in the banking sector, and that would help bring down lending rates, which presently hover between 24 and 27 per cent.
“We will be working closely with the banks to ensure that they do not pass on their operational inefficiencies and overhead costs to their clients,” he said.
The banking industry’s cost in relation to its income has consistently remained around 50 per cent for the past four years.
Currently, the CEOs of the top-tier banks in the country earn between GH₵874,000 and GH₵1.3 million per annum, and financial watchers say this contributes to inefficiencies, resulting in the high operating costs of the banks, which are passed on through high interest rates to their clients.
To address this problem, Dr Addison said, compensation packages of the top management of the banks would henceforth not be in excess of the overall results that they put out.
He said the overall performance of the banks would be linked to clear parameters that included the quality of their assets to determine the remuneration of top management executives.
The MPC maintained the policy rate at 16 per cent as a result of some threats to the country’s economic growth and inflationary outlook.