Governor of the Bank of Ghana, Dr Ernest Addison, has underscored the importance of corporate governance, saying that, it promotes sound financial system.

Speaking at the 8th annual general meeting of the Ghana Association of Savings and Loans Companies, Dr Addison said sound governance practices contributed to the safety, soundness and stability of the overall financial system and the entire economy.

He said there had been several worrisome infractions due to poor corporate governance and weak risk management practices in the banking and specialized deposit-taking institutions in recent times.

These include connected lending, resulting in exposures to holding companies, directors and related parties above the prescribed statutory limits; weak internal controls leading to unreliable financial statements; and weak risk management structures.

There is also the appointment of key management personnel without recourse to Act 930; Non – Compliance with regulatory requirements such as violation of liquidity requirements, Non-compliance with publication of Accounts; and poor credit underwriting standards.

“Sound corporate governance practices are crucial to improving economic efficiency gains because it restraints mismanagement in financial institutions and instil discipline in the decision-making process at the Board level,” Dr Addison said.

He said the potential risks of non-compliance to sound corporate governance principles placed enormous pressures on regulators of financial institutions.

Dr Addison said without good governance structures, public trust in financial institutions could be eroded which put shareholders’ investments and depositors’ funds at risk.

“No amount of capital that is injected or liquidity that is made available in any institution would suffice when the governance structures are weak,” he said.

Mr Tweneboah Kodua Boakye, the Executive Secretary of GHASALC, urged members not to fail the public through their actions and inactions.

He said the members of the Association occupied huge space in the Financial Services spectrum and that the expectations of the populace should be their guiding principles.

He said the Association established 10 years ago, currently has 37 licenced Savings and Loans Companies and continues to engage with relevant stakeholders in the industry.

He noted that the members played critical roles in the national development agenda but said there was no clear policy direction developed for the sector.

“We also serve as a bridge between the commercial banks and the lower tier microfinance sector, therefore, being a critical component in the financial inclusion agenda of the country.”

“We are known to be a great supporter of the SME sector of the economy. We manage more than 45 per cent of the total Non-Bank Financial Institutions Assets through our over 1,080 business centres across the 10 regions of the country employing over 12,000 staff directly.”

He urged members to operate within the law, especially the Banks and Specialised Deposit Taking Institutions Act, 2018 (930).

Mr Boakye said, there was the need to remember the numerous directives issued and those yet to be issued by the Regulator adding that; “we need to invest in compliance”.

He also advised members to continuously explore appropriate technology, relevant to the business and the future of delivering banking services.

Mr Kofi Ampofo Agyapong, the Chairman of the GHASALC, said the industry has an asset of more than 7.7 billion cedis in over 640 branches and agencies across the country.

Mr Agyapong said the association held series of activities to build capacity of members, some of which were the CEOs and MDs Roundtable Fora.

He hinted that the Association, as part of its repositioning in the financial space, would organise its maiden savings and loans month in September this year.

The AGM was held on the theme: “Strengthening the practise of Corporate Governance: the Role of Regulation and Practice.”