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Financial Markets In Ghana


E. Asiedu-Mante
The banking systems has developed systematically over the years and presently consist of 17 banks engaged variously in commercial, development and merchant banking and 130 rural/community banks.
financial market ghana
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Bank Distress in Liberia


C. Kaba

This paper explains developments in the financial sector immediately after the cessation of hostilities and the restoration of near normalcy, at least in Monrovia and its environs in 1991. The focus is on economic and political developments that relate to financial distress of banks.

There are twelve (12) licensed banks operating in Liberia, comprising two (2) government-owned banks and ten (10) locally incorporated private banks. Eight (8) of these banks are considered distressed, while four (4) are actively operating. The two government-owned banks are specialized in housing and agricultural financing services. Since 1981, six (6) banks have been placed in liquidation, while one of the distressed banks has been seized pending court ruling for liquidation or reorganization. Details of their state are given in Table 1



Bank of Liberia
Compulsory liquidation
Unsecured loans and advances civil unrest
Eroded public confidence
Chase Manhattan
Voluntary liquidation
Scaled down by Head Office

Bank of Commerce and Credit Int’l (BCCI)
Compulsory liquidation
Collapse of BCCI worldwide
Financial burden on customers due to non-payment of deposits
First Int’l Merchant Bank (FIMB)
Compulsory liquidation
Abandonment due to civil war
Eroded public confidence
Meridien BIAO Bank Liberia, Ltd
Seizure; liquidation filed
Worldwide collapse of Meridien Int’l & BIAO
Same as BCCI above
Voluntary liquidation
Scaled down by Head Office
Eroded public confidence
The Author is a Senior Bank Examiner II, National Bank of Liberia

Banking supervision is one of the many functions of Central Banks. This responsibility was assumed by the National Bank of Liberia (NBL) in 1974 by the enactment of the Acts of the National Bank of Liberia and Financial Institutions and subsequent amendments. Before then, the Ministry of Finance and a branch of the a foreign-owned commercial bank functioned as a central bank in Liberia.

Supervisory policies and practices are enshrined in the 1074 Acts of NBL and Financial Institutions. These two instruments provide governance on regulatory requirements such as license, fractional reserve on deposits, liquidity, minimum capital, interest rates, as well as other reports that may be requested by law.

Problems such as maintenance of liquidity, capital and reserve shortfalls etc., were unalarming during the pre-crisis period, compared to the post-crisis period, which now features acute illiquidity, capital and reserve shortfalls coupled with financial mismanagement and misconduct. Despite the many interventions by the NBL, a large number of banks still remain in the country.

The civil crisis in Liberia has been prolonged for nearly eight (8) years now. The persistent crisis has devastated all sectors as houses, electricity and water plants, communication equipment etc. Most of these were either looted and/or destroyed. These political and economic developments have incapacitated banks, thus contributing to a large extent of their distress.

Within its limited scope, the paper is organized in three (3) parts, beginning with the introduction, which gives the background of the paper. The second part presents distressed bank, giving number of banks involved, factors leading to their distress and NBL’s assistance to revitalizing them. The conclusion, which is in Part III, summarizes the problems of distressed banks as outlined in the text and solicits views and assistance from other central banks.


Financial distress of banks in Liberia is indued by internal and external factors. External factors are those that led to the world wide closure of Bank of Commerce and Credit International (BCCI) and Meridien BIAO Bank, both institutions having had large influence on the Liberian financial system; while the former includes the unresolved civil conflict, mis-planned and mis-directed monetary policies; over exposure of government improprieties of bank executives, etc. This crisis devastated both public and private sectors of the economy and continues to show very poor economic output. Besides the destruction of trained human resources, infrastructural facilities, such as water, power and communication, public buildings, bridges, roads, business ventures, etc. were either looted, severely damaged and/or completely destroyed. These destructions have severely distorted both micro and macroeconomic inputs and outputs.

The effect on bank is illiquidity, occasioned by the sluggish performance of their lending portfolio, inadequate earning, massive withdrawal of funds, continuous rise in the rate of exchange and a large extent, poor performance of the overall economy. The management teams of most banks have not performed well. Insider dealings and non-adherence to policies and procedures are rampant in most banking institutions. General level of supervision by the board of directors of banking action respectively, while the other eight banks conduct general commercial banking institutions seems to be ineffective and measures to remove apparent deficiencies are hardly even addressed at board meetings. Problems are allowed to persist for a long period before attempts are made to resolve them. Accountability is doubtful in most of these institutions. These factors among others have given rise to the present deteriorating condition of commercial banks in Liberia. Eight (8) of the twelve licensed banks have long since qualified as distressed. Even though each of the eight banks started with one or a combination of the factors of distressed banks, all of them are now experiencing the above factors.

The causes of bank distress in Liberia may be summarized as follows:

The looting of vault cash of banks totaling L$ 15 million and assets which are yet to be quantified.
The prevalence of a reduction/shortfall in liquidity, capital and reserves.
Problems associated with external factors, such as global price reductions in export commodities, liquidation of foreign banks with branches in Liberia, as well as internal factors, which include managerial imprudence, financial misconduct, lack of trained manpower, insider dealings etc.
NBL’s exposure to central government and its parastatals in the form of excessive unsecured advances and loans, thereby eroding the liquidity base and rending the NBL impotent to extend further credits to distressed banks.
Inability of NBL to rigorously enforce the Financial Institution Act, even where there are gross violations due to bottlenecks in court proceedings.
Inefficient supervision of the financial affairs of financial institutions by their board of directors.
Difficulties in formulating and implementing overall monetary policies due to the absence of concrete GDP data as well as lack of fiscal and monetary discipline.
Overvalued currency, i.e. the Liberian dollar exchange rate to the United States dollar is officially pegged at 1:1, which has led to the disappearance of the latter and putting into motion an inflationary spiral. The current parallel market rate of exchange stands at L$60: US$ 1, selling and L$61: US$1 buying.
Inability of the financial sectors to operate beyond Monrovia, thus preventing banks from mobilizing deposits and extending credits.
Money supply and exchange rate continues to show greater growth while real rate of interest shows negative trend, thereby acting a disincentive to long term lending by banks.
Non-performance of the export-oriented productive sector, of the economy (principally iron ore and rubber), thereby jeopardizing foreign exchange earnings and off-balance sheet income of banks.
Huge capital flight that has dissipated domestic and foreign investment, characterized by excessive demand for foreign exchange, thereby inducing a rise in the rate of exchange vis-à-vis inflation.
Narrowness of credit outlet coupled with the partitioning of the domestic market, thereby inhibiting the growth of the banking system.
The difficulties in harmonizing the existence of two (2) domestic currencies.
Distorted fiscal policy and incapacity of the Liberian Government to liquidate its outstanding balances to the banking system and NBL.
Indeed, as a “bank of last resort”, the NBL has played and continues to play its part in helping to salvage the banks since the beginning of the crisis. As at the moment, the total exposure of NBL to these banks stands at L$50 million. The NBL has increased its exposure painstakingly and at the risk of rocking the very foundation that the commercial banks depend on the for continuity. Much needed resources have dried up thereby threatening the ability of the NBL to operate as a “bank of last resort”. The situation is also compromising the effectiveness of the Bank not only as the monetary agent of the government, but also as institution poised to make any meaningful impact on the conduct of monetary management.

The economy has not functioned as a unit since early 1990. Because of this situation, the Liberian Government has continuously found it difficult to finance its operations and has had to resort to internal borrowing from the NBL. As of March 31, 1995, Government’s Medium-term Loan with the NBL stood at L$700, 649,650. This amount is about 59.3% of overall money supply and 1.6 times Liberian central bank notes and in circulation.


Ailing banks have not recovered from financial distress despite the assistance extended to them by the NBL. So far the total exposure of NBL to distressed banks stands at L$50 million in addition to drawdown of all 22% statutory reserves held at the NBL. The situation has reached a point where NBL can no longer assist in terms of credit extensions. The only remedy is liquidate, but again, NBL lacks the financial capability to do so.

Considering its financial constraints, the NBL has resorted in seeking external assistance for ailing banks by way of proposals to foreign and international financial institutions. Distressed banks have been requested to submit proposals for revitalization. Banks involved have submitted their proposals and their revitalization are estimated to cost a total of US$6.9 million and L$316.6 million. A committee has been set up to prepare a consolidated proposal incorporating the requirements of all the distressed banks for forwarding to foreign and international financial institutions for funding. The committee is assiduously working on the proposal.

In the light of the precarious situation, NBL will appreciate  advice and/or assistance (material and financial) from African central banks which will help in alleviating the problems of ailing banks in Liberia.

Bank Distress in Gambia



The Gambia currently has four commercial banks and one Islamic bank with the former having branches in the rural areas. In addition to these banks, a number of non-bank financial institutions (NBFI) were established. The bulk of their operations are concentrated in the rural areas. The emergence and quick expansion of the NBFI made it prudent for the government to initiate a policy that would ensure that they are properly registered under savings and credit associations as finance companies. [Read more…]

Banking Supervision In WAMU Countries




The West African Monetary Union (UEMOA) comprises eight countries, namely Benin, Burkina, Cote d’lvoire, Mali, Niger, Senegal, Togo, and Guinea-Bissau. These countries form a monetary zone characterized by the use of a common currency, the CFA Franc, issued by a common central bank, the BCEAO; the pooling of international reserves, the free transferabity within the zone, and a unified monetary policy. [Read more…]

Prudential Regulation And Central Banking Policy



Adequate bank regulation and supervision are crucial prerequisites for both financial stability and flexibility, (Polizatto, 1990). To a certain extent, supervision can substitute regulations as it does in Britain. Clearly, regulations cannot replace supervision, (Fry, 1995). Regulations are of two dimensions, viz economic and prudential. Economic regulation refers to regulation designed to achieve economic goals e.g. reserve requirements, directed credit and credit allocation etc. prudential regulation refers to the set of laws, rules and regulations that is designed to minimize the risks bank assume and to ensure the safety and soundness of both individual institutions and the system as a whole. Examples include lending limits, minimum capital adequacy ratio and liquidity ratio. [Read more…]