• Thaddeus Sory says the Supreme Court’s unanimous decision directing BoG is bad
• He said the court failed to lay a clear-cut precedent to be followed in future
• Thaddeus Sory said this in an article published by Dennis Law
Lawyer Thaddeus Sory says the Supreme Court’s decision that backed the Bank of Ghana’s ability to issue certain directives to banks is bad and problematic.
According to him, the Supreme Court got it wrong and also failed to lay a clear-cut precedent to be followed in future.
Thaddeus Sory in an article published by Dennis Law argues:
“If, therefore, the practitioner were confronted with the question whether a particular directive was legislative or administrative, what will be the tests or principles to apply? And if I may then take an “inferential leap” of my own, what is the ratio of this decision?
“Or has the decision added any insight or given practitioners and students of constitutional and administrative law any better guidance and understanding of the scope and application of Article 11(7) of the Constitution? My answer to this question is negative. The decision messes up a terrain which was gradually becoming clearer from the earlier decisions on the subject.”
Sory, who was the lawyer for the Association of Finance Houses, observes that, the decision by the Supreme Court had no legal basis, no clarity and no direction as to how to distinguish “an administrative act” from “Orders, Rules and Regulations” provided for in article 11(7) of the 1992 Constitution.
The Supreme Court, in a unanimous decision, ruled that the Bank of Ghana did no wrong when it opted not to submit directives issued for banks to Parliament.
The court held, the BoG ought to submit such directives that will place the Central Bank under “undue parliamentary oversight thereby upsetting the necessary independence of the Bank”.
The Central Bank in 2018 issued a directive to Banks indicating it is in line with its powers under Sections 56 and 92 (1) of the Banks and Specialized Deposit-Taking Institutions Act (Act 930).
Section 56 of Act 930 empowers the BoG to prescribe rules regarding any matter of corporate governance in banks, specialized deposit-taking institutions, among others.
The said provision states; “The Bank of Ghana may prescribe rules regarding any matter of corporate governance of a bank, specialised deposit-taking institution or financial holding company that the Bank of Ghana considers necessary or appropriate to ensure prudent operation, including matters relating to:
(a) the scope and nature of the duties of directors of a bank, specialised deposit-taking institution or financial holding company;
(b) the requirements for audit and other specific committees of the Board;
(c) the responsibilities of key management personnel;
(d) risk management;
(e) internal audit; and
(f) internal controls and compliance
Section 92, on the other hand, allows the BOG to issue directives if it is satisfied that it is necessary to secure the proper management of such institutions.
“The Bank may issue directives to banks, specialised deposit-taking institutions or financial holding companies generally or to a class or classes of banks, specialised deposit-taking institutions or financial holding companies where the Bank of Ghana is satisfied that;
(a) it is necessary to secure the proper management of a bank, specialised deposit-taking institution or financial holding company generally;
(b) it is necessary to prevent the affairs of banks, specialised deposit-taking institutions or financial holding companies being conducted in a manner detrimental to the interest of depositors and other stakeholders or prejudicial to the interests of the banks or specialised deposit-taking institutions or financial holding companies;
(c) it is necessary to maintain the overall stability of the financial system in the country, or (d) it is necessary to give full effect to the provisions of this Act.”
The BoG issued the first directive in March 2018 and revised it in December 2018.
In December 2018, the BoG further directed that, the interest of depositors and other stakeholders is to enhance corporate performance and accountability of the Regulated Financial Institutions.
The court then provided guidelines for the appointment of Bank heads and handed certain responsibilities to governing boards to ensure effective governance.
But, the Association of Finance Houses in court the BoG’s directives are legislative instruments, specifically rules and regulations within the meaning of Article 11 (1)(c) of the 1992 constitution and therefore ought to have come into effect in accordance with Article 11 (7) of the constitution.
This implies it should have been laid in parliament, published in the Gazette on the day it is laid and come into force at the expiration of twenty-one sitting days after being laid unless Parliament annuls it through a vote of two-thirds of all the MPs.
The Association of Finance Houses’ position was rejected by the Supreme Court.
