University of Ghana  http://ugspace.ug.edu.gh
UNIVERSITY OF GHANA 
 
 
CORPORATE GOVERNANCE PRACTICES AND LOAN PERFORMANCE OF BANKS 
IN GHANA 
 
 
 
BY 
 
 
PATRICK KWEKU SAM 
(10029100) 
 
 
 
THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN 
PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MPHIL 
ACCOUNTING DEGREE 
 
 
 
FEBRUARY, 2016 
 
University of Ghana  http://ugspace.ug.edu.gh
DECLARATION 
 
I, Patrick Kweku Sam, do hereby declare that this work is the result of my own research and has 
not been presented by anyone for academic award in this or any other university. All references 
used in the work have been fully acknowledged.  
I bear sole responsibility for any shortcomings.   
 
Student Name                                             Date                                            Signature 
 
 
PATRICK KWEKU SAM                    ……………                               ... ………….. 
(10029100) 
 
 
 
 
 
 
 
 
 
  
 
 
i 
 
University of Ghana  http://ugspace.ug.edu.gh
CERTIFICATION 
 
We hereby certify that this thesis was supervised in accordance with procedures laid down by the 
University of Ghana. 
 
 
.........………………………           ...........……………………… 
DR. CLETUS AGYENIM-BOATENG       DATE 
(PRINCIPAL SUPERVISOR) 
 
 
 
 
.........………………………         .........………………………  
MR. JAMES KWAME OTIEKU       DATE 
(CO-SUPERVISOR) 
 
 
 
 
 
 
 
 
 
ii 
 
University of Ghana  http://ugspace.ug.edu.gh
DEDICATION 
 
This work is dedicated to my merciful mother, Madam Mercy Adwoa Mansa Ellis, who has 
single-handedly been both a father and mother to me since the demise of my biological father 
when I was an infant. I also dedicate the work to my children: Patrick, Patience, Patricia and 
Prince and to my wife Mrs. Faustina Sam, for their unfailing support, care and encouragement at 
various stages in my education.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
iii 
 
University of Ghana  http://ugspace.ug.edu.gh
ACKNOWLEDGEMENT 
 
I dedicate this work to the Almighty God for granting me His Grace and seeing me through this 
work. 
Special thanks to my supervisors, Dr. Cletus Agyenim-Boateng and Mr. James Kwame Otieku 
for their patience, criticisms, vetting, corrections, understanding, guidance and zeal in seeing this 
work to its expected end. I appreciate all their council, advice and help. I am indebted to them for 
putting all the necessary resources at my disposal. 
I am also grateful to all who contributed meaningful to my data collection and analysis. 
I also wish to express my gratitude to all relationship managers: credit analysts, finance officers 
and officers at the Research Department of the Banks, as well those at the Banking Supervision 
Department (BSD) of the Central Bank of Ghana, for willingly releasing all the necessary data 
required, which helped me to finish this work in time. I wish to mention specifically Mr. Joseph 
Gyekye-eck,  Head of Credit Risk of the Universal Merchant Bank, Mr. Alex Frimpong and Mr. 
Samuel Adzido all of BSD for their insightful contributions.  
I express my profound gratitude to my study mates: Samuel Atuahene and Peter Amfo for 
providing me with the necessary information and willingly sharing their human and material 
resources to make our stay at the university successful.  
Finally, the dearest appreciations are directed to my family for making so many contributions 
and so much sacrifice towards my graduate course, and I thank them for that. I equally thank 
friends who in diverse ways assisted me to ensure that this work is successful. 
            
iv 
 
University of Ghana  http://ugspace.ug.edu.gh
ABSTRACT 
 
Corporate governance in loan administration has become a subject of sustained research interest 
in recent years. This study specifically examines the relationship between various variables of 
corporate governance practices and the loan performance of banks using loan loss provisions. 
Using quantitative techniques of trend analysis, regression and correlation of secondary data 
from the Bank of Ghana, the study looked at twenty (20) selected commercial banks in Ghana on 
the relationship between corporate governance and loan administration from 2006 to 2013. The 
results of the data are presented in statistical tables and graphs. The results show that the banking 
industry in Ghana was formerly dominated by four banks namely Ghana Commercial Bank 
(GCB), Barclays Bank Ghana (BBG), Standard Chartered Bank (SCB) and Ecobank Ghana 
(EBG). These banks command more than 35% of the market share. The market share of GCB, 
BBG and SCB dipped and banks such as Universal Merchant Bank (UMB) and the International 
Commercial Bank (ICB) saw negative growth in total deposits in 2012 and 2013. Also, the loan 
loss provisions of all the banks showed that nine (9) banks achieved a loan loss provision above 
the industry average of 9% as at 2013. Zenith Bank was the only bank with a loan loss provision 
of 9% at 2013 whilst sixteen (16) banks had a loan loss provision below the industry average as 
at 2013. The multivariate analysis finds that corporate governance variables of board of directors 
(BD), credit committee (CC), lending units (LU), relationship management (RM), credit 
monitoring (CM), and Bank of Ghana (BG) all have a significant impact on non-performing 
loans of commercial banks. The study recommends that emphasis should not only be on these 
explanatory variables, but on other corporate governance variables such as; insider abuse, 
transparency, disclosure and accountability in line with loan management.  
v 
 
University of Ghana  http://ugspace.ug.edu.gh
LIST OF FIGURES 
Figure 2. 1: The five basic principles guiding corporate governance practices ............................ 14 
Figure 2. 2: Approaches to corporate governance practices ......................................................... 15 
Figure 2. 3: The elements of corporate governance practices in relation to loan performance .... 15 
 
Figure 3. 1: Loan loss provision for December 2013 ................................................................... 55 
Figure 3. 2: Market Share of deposits of all banks in Ghana as at 31st December, 2013 ............ 56 
Figure 3. 3: Number of years of existences of all banks in Ghana as at 31st December, 2013 .... 57 
 
Figure 4. 1: The trend of deposits at GCB .................................................................................... 65 
Figure 4. 2: GCB loan loss provision and loan to deposit ratio .................................................... 66 
Figure 4. 3: GCB gross loan loss percentages .............................................................................. 67 
Figure 4. 4: The trend of deposits at BBG .................................................................................... 69 
Figure 4. 5: BBG loan per net assets ratios ................................................................................... 70 
Figure 4. 6: BBG loan loss provision and loan to deposit ratio .................................................... 72 
Figure 4. 7: SCB gross loan per net assets ratios .......................................................................... 74 
Figure 4. 8: The trend of deposits at SCB ..................................................................................... 75 
Figure 4. 9: SCB loan loss provision and loan to deposit ratio..................................................... 76 
Figure 4. 10: The trend of deposits at EBG .................................................................................. 78 
Figure 4. 11: EBG gross loan per net assets ratios ....................................................................... 79 
Figure 4. 12: EBG loan loss provision and loan to deposit ratio .................................................. 80 
Figure 4. 13: The trend of deposits at NIB ................................................................................... 82 
Figure 4. 14: NIB loan loss provision and loan to deposit ratio ................................................... 83 
Figure 4. 15: The trend of deposits at SG-SSB ............................................................................. 85 
Figure 4. 16:  SG-SSB loan loss provision and loan to deposit ratio............................................ 86 
Figure 4. 17: ADB gross loan per net assets ratios ....................................................................... 88 
Figure 4. 18: The trend of deposits at ADB .................................................................................. 89 
Figure 4. 19: ADB loan loss provision and loan to deposit ratio .................................................. 90 
Figure 4. 20: The trend of deposits at GT-Bank ........................................................................... 92 
Figure 4. 21: GT-Bank loan loss provision and loan to deposit ratio ........................................... 93 
vi 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 22: The trend of deposits at SBL ................................................................................... 94 
Figure 4. 23: SBL loan loss provision and loan to deposit ratio ................................................... 95 
Figure 4. 24: The trend of deposits at UT bank ............................................................................ 97 
Figure 4. 25: UT bank loan loss provision and loan to deposit ratio ............................................ 98 
Figure 4. 26: The trend of deposits at UMB ............................................................................... 100 
Figure 4. 27: UMB loan loss provision and loan to deposit ratio ............................................... 101 
Figure 4. 28: The trend of deposits at ZIB .................................................................................. 103 
Figure 4. 29: ZIB loan loss provision and loan to deposit ratio .................................................. 104 
Figure 4. 30: The trend of deposits at CAL bank ....................................................................... 106 
Figure 4. 31: CAL bank loan loss provision and loan to deposit ratio ....................................... 107 
Figure 4. 32: The trend of deposits at BOA ................................................................................ 108 
Figure 4. 33: BOA loan loss provision and loan to deposit ratio ................................................ 109 
Figure 4. 34: The trend of deposits at ICB.................................................................................. 111 
Figure 4. 35:  ICB loan loss provision and loan to deposit ratio ................................................ 112 
Figure 4. 36: The trend of deposits at FAMBL .......................................................................... 114 
Figure 4. 37: FAMBL loan loss provision and loan to deposit ratio .......................................... 115 
Figure 4. 38: The trend of deposits at Sahel bank....................................................................... 117 
Figure 4. 39: Sahel bank Loan loss provision and loan to deposit ratio ..................................... 118 
Figure 4. 40: The trend of deposits at UNIBANK ...................................................................... 120 
Figure 4. 41: UNIBANK loan loss provision and loan to deposit ratio ...................................... 121 
Figure 4. 42: The trend of deposits at HFC bank ........................................................................ 123 
Figure 4. 43: HFC bank loan loss provision and loan to deposit ratio........................................ 124 
Figure 4. 44: The trend of deposits at PBL ................................................................................. 126 
Figure 4. 45: PBL loan loss provision and loan to deposit ratio ................................................. 127 
 
 
 
 
 
 
vii 
 
University of Ghana  http://ugspace.ug.edu.gh
LIST OF TABLES 
Table 2. 1: Category of loan, days and loss provision .................................................................. 49 
 
Table 4. 1: Regression on the relationship between corporate governance and loan loss provision 
(non-performing loans) ............................................................................................................... 129 
Table 4. 2: Correlation between the non-performing loans (loan loss provision) and corporate 
governance elements in 20 selected banks in Ghana .................................................................. 132 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
viii 
 
University of Ghana  http://ugspace.ug.edu.gh
TABLE OF CONTENTS 
 
DECLARATION ............................................................................................................................. i 
CERTIFICATION .......................................................................................................................... ii 
DEDICATION ............................................................................................................................... iii 
ACKNOWLEDGEMENT ............................................................................................................. iv 
ABSTRACT .................................................................................................................................... v 
LIST OF FIGURES ....................................................................................................................... vi 
LIST OF TABLES ....................................................................................................................... viii 
TABLE OF CONTENTS ............................................................................................................... ix 
CHAPTER ONE ............................................................................................................................. 1 
INTRODUCTION .......................................................................................................................... 1 
1.1 Background of the study .................................................................................................. 1 
1.2 Research problem ............................................................................................................. 4 
1.3 Research Aim ................................................................................................................... 6 
1.4 Research objectives .......................................................................................................... 6 
1.5 Research questions ........................................................................................................... 6 
1.6 Significance of the study .................................................................................................. 7 
1.7 Chapter disposition ........................................................................................................... 8 
CHAPTER TWO ............................................................................................................................ 9 
LITERATURE REVIEW ............................................................................................................... 9 
2.1 Introduction ...................................................................................................................... 9 
2.2.2 Principles and components of corporate governance practices .................................... 13 
2.3 Tools for controlling commercial banks loans .................................................................... 40 
2.4 Difficulties associated with corporate governance .............................................................. 42 
2.5 Loan management and performance ................................................................................... 44 
2.5.1 What is a bank loan (credit)? ........................................................................................ 44 
2.5.2 Sources of credit risk .................................................................................................... 45 
2.6 Loan loss provision (LLP)................................................................................................... 48 
2.7 Regulatory framework and corporate governance practices ............................................... 50 
ix 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER THREE ...................................................................................................................... 53 
METHODOLOGY ....................................................................................................................... 53 
3.1 Introduction ......................................................................................................................... 53 
3.2 Research Design .................................................................................................................. 53 
3.3 Population and sample size ............................................................................................ 54 
3.4 Source of data ...................................................................................................................... 58 
3.5 Data analysis ....................................................................................................................... 58 
3.5.1     Specification of empirical model .............................................................................. 58 
3.5.2   Description of variables and measurement ................................................................. 60 
3.6 Trend analysis ..................................................................................................................... 61 
3.7 Research limitations ............................................................................................................ 61 
3.8     Concluding remarks ........................................................................................................ 62 
CHAPTER FOUR ......................................................................................................................... 63 
DATA ANALYSIS AND DISCUSSION OF RESULTS ............................................................ 63 
4.1 Introduction ......................................................................................................................... 63 
4.2 The trend of loan loss provision of sampled banks ............................................................. 63 
4.2.1 GCB (Ghana Commercial Bank) .................................................................................. 64 
4.2.2 Barclays Bank Ghana (BBG) ....................................................................................... 68 
4.2.3 Standard Charteered Bank (SCB) ................................................................................. 72 
4.2.4 Ecobank Ghana (EBG) ................................................................................................. 77 
4.2.6 Societe Generale- Social Security Bank (SG-SSB) ...................................................... 84 
4.2.7 Agricultural Development Bank (ADB)....................................................................... 86 
4.2.9 Stanbic Bank (SBL) ...................................................................................................... 93 
4.2.10 Unique Trust Bank (UTB) .......................................................................................... 96 
4.2.11 Universal Merchant Bank (UMB) .............................................................................. 98 
4.2.12 Zenith Bank (ZIB) .................................................................................................... 102 
4.2.13 CAL Bank (CAL) ..................................................................................................... 105 
4.2.14 Bank of Africa (BOA) .............................................................................................. 108 
4.2.15 International Commercial Bank (ICB) ..................................................................... 110 
4.2.16 First Atlantic Merchant Bank (FAMBL) .................................................................. 113 
x 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.17 Sahel-Sahara Bank (Sahel) ....................................................................................... 115 
4.2.18 UniBank (UNI) ......................................................................................................... 119 
4.2.19 HFC Bank (HFC)...................................................................................................... 122 
4.2.20 Prudential Bank (PBL) ............................................................................................. 125 
4.3 Relationship between corporate governance practices and loan loss provision ............... 128 
4.3.1 Multivariate data analysis ........................................................................................... 128 
4.3.2 Correlation .................................................................................................................. 132 
CHAPTER FIVE ........................................................................................................................ 133 
SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................................. 133 
5.1 Introduction ....................................................................................................................... 133 
5.2 Summary of findings ......................................................................................................... 133 
5.2.1 The trend of loan loss provision of sampled banks .................................................... 133 
5.2.2 Summary from the relationship between corporate governance practices and loan loss 
provision .............................................................................................................................. 134 
5.3 Conclusion and Recommendations ................................................................................... 135 
BIBLIOGRAPHY ....................................................................................................................... 137 
APPENDICES ............................................................................................................................ 141 
 
 
 
 
xi 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER ONE 
INTRODUCTION 
1.1 Background of the study 
In recent decades corporate governance has become a subject of sustained research interest in 
academia and corporate settings as it is believed to contribute positively to organisational 
outcomes as well as enhancing shareholder value and investors’ confidence (Claessens & 
Yurtoglu, 2012). There exists empirical evidence of events that are responsible for the 
heightened interest in corporate governance (Ioannou & Serafeim, 2010).  For instance Claessens 
& Yurtoglu (2012) conducted a survey on corporate governance in emerging markets. Their 
study reveals that voluntary and market corporate governance mechanisms have less effect when 
a country's governance system is weak. This is shown in how governance regimes change and 
the entrance of democracy into governance systems have impacted on firms in many economies. 
Also the study reveals that there is less evidence available on the direct relationship between 
corporate governance and socio-environmental performance of firms.  
 
Corporate governance has been established as one of the tools that can mitigate corrupt 
behaviours and encourage ethical practices in organisations (Rossouw, 2005; Arjoon, 2005). 
Adams and Mehran (2012) posit that one of the major roles played by effective governance 
structures in banks is to shape their stability and sustainability. Again, a number of research 
studies on corporate governance practices (e.g. board composition, Chief Executive Officer 
(CEO)/Chairperson split, non-executive directors, audit committees) has shown that sound 
corporate governance practices boost the annual financial performance of firms (e.g. Laing & 
Weir, 1999; Bauer et al., 2004; Alves & Mendes, 2004). Besides these good radiance on 
1 
 
University of Ghana  http://ugspace.ug.edu.gh
corporate governance, a number of studies have also shed light on a poor corporate governance 
practices of a company and how it impacts negatively on their financial performance.  
 
Chen et al. (2011) explored how ownership structures of borrowing firms influence the financing 
arrangements for their syndicated loans. Using a novel data set made up of borrowing firms 
across twenty-two (22) countries from 1996 to 2008, it came out of the study that divergence 
between the control rights and cash-flow rights of the largest ultimate owner of a borrowing firm 
significantly affects the structure of its syndicated loan. Marie et al. (2013) examined the 
influence of corporate governance quality on firms' choice between convertible debt, straight 
debt, and equity. Using a Western European sample of security offerings made between 2000 
and 2010, it was found that weaker firm-specific and country-specific corporate governance 
quality increases firms' likelihood of issuing convertible debt instead of straight debt and 
common equity. The results also suggest that corporate governance quality is a significant 
security choice determinant, with firms using convertible debt as a substitute for high quality 
governance mechanisms. Sungyoon and Wooseok (2008) also studied the corporate governance 
role of banks by investigating the effect of bank monitoring on the borrowers’ earnings 
management behaviour. They concluded that earnings management behaviour generally 
decreases as the strength of bank monitoring increases. Their study’s strength of bank monitoring 
is measured as (1) the magnitude of a bank loan, (2) the reputation (rank) of a lead bank, (3) the 
length of a bank loan, and (4) the number of lenders. These results imply that bank monitoring 
plays an important role in the corporate governance of bank-dependent firms. Additional studies 
of bank loan characteristics such as collateral, refinancing, loan types, and loan purposes and 
their effects on borrowers’ earnings management behaviour show that collateral and loan types 
2 
 
University of Ghana  http://ugspace.ug.edu.gh
are significantly associated with borrowers’ earnings management behaviour, while refinancing 
and loan purposes have no association (Sungyoon & Wooseok, 2008). In all these studies, loan 
loss provision is paramount in determining the quality and quantity of bank loans of commercial 
banks as a result of non-performing loans which drain the growth and sustainability of banks. 
 
On the macro level, the financial crises in 1998 in Russia, Asia and Brazil as well as the financial 
crisis in 2007 and 2008 showed how deficiencies in corporate governance can endanger global 
financial stability (Williamson, 2013). Corporate governance scandals in the United States and 
Europe after the 1998 financial crises proved this (Anderson et al., 2004).  In December 2003, 
Parmalat, an Italian leading worldwide diary company, followed suit with a financial scandal as a 
result of poor corporate governance structures (Buchanan, Yang, 2005). Effective governance is 
critical to all economic transactions in emerging and transitioning economies (Dharwadkar, 
George, & Brandes, 2000). The issue of corporate governance is widely acknowledged as a 
major challenge in achieving sustainable financial sector development and economic growth in 
developing economies (Nenova, 2004; Oman & Blume, 2005; Iskander & Chamlou, 2000). The 
significance of better corporate governance in private as well as public sector firms has also 
emerged as one of the most critical components of regulatory reforms in many countries.  
 
Ghana, as an emerging economy is not exempted from the wave of corporate governance issues 
happening across nations. To show this, CAL bank in 2008 faced a huge challenge when the 
bank’s corporate governance issues came to light showing many flaws in its corporate 
governance practices (Tetteh, 2008). This rumpus exposed many flaws in the governance set-up 
3 
 
University of Ghana  http://ugspace.ug.edu.gh
of the bank and caused shareholders to know their rights and responsibilities. Corporate 
governance therefore plays a critical role in an organisation’s operations. 
 
1.2 Research problem 
Weak corporate governance does not only lead to poor firm performance and risky financing 
patterns but it is also conducive for macroeconomic crises (Claessens et al., 2002). Most recent 
financial crises have seen their share of corporate governance failure in financial institutions and 
corporations leading to systemic consequences (Ashbaugh-Skaife et al., 2006). Corporate 
governance systems differ in corporations and industries (Yoshikawa & Rasheed, 2009). But the 
financial scandals in the banking sector seems has attracted much attention. But research work in 
this area is little and more work is needed for banks to know the components of corporate 
governance practices in relation to their loan performance. Addressing this issue should be key 
since banks are important financing agents. Furthermore, Byers et al (2008) studied whether 
corporate governance and bank monitoring influence the effective running of banks. They found 
that loan announcements are more likely to have positive wealth effects for firms with weak 
internal corporate governance. The study revealed how banks monitor their borrowers just to be 
sure they are credit worthy. But the study was not able to find out how banks measure their loan 
loss, and it looked at only internal structures without considering external factors. Also, 
corporate governance tend to extend beyond the internal corporate governance to include other 
external stakeholders like the government through the central bank, customers, competitors, and 
other environmental factors (Billett & Xue, 2007). Aside this, there are a number of studies on 
corporate governance on helping banks to achieve it targets in relation to risks (Kashyap et al., 
4 
 
University of Ghana  http://ugspace.ug.edu.gh
2008). For instance, firms with higher institutional ownership took more risks prior to the global 
financial crisis, which resulted in larger shareholder losses during the crisis period 
(Brunnermeier, 2009). Also, firms with more independent boards raised more equity capital 
during the crisis, which led to a wealth transfer from existing shareholders to debt holders 
(Taylor, 2009).  
 
Also, corporate governance has been identified in previous studies to influence firms' financing 
or capital structure decisions which affect performance (Berger et al., 1997; Friend & Lang, 
1988) in the advanced economies. Bertrand et al. (2002) have argued that corporate governance 
of financial institutions has been an under-highlighted area in developing economies when there 
were massive failures at major institutions in advanced countries. Even though there are some 
researches on corporate governance of other areas in developing economies (Gompers et al., 
2003; Bauer et al., 2004), corporate governance of banks in these economies has received little 
attention. Very little, however, has been done on corporate governance in Sub-Saharan Africa, 
especially with respect to loan performances. In Ghana, for instance, economic development and 
restructuring have introduced modern forms of banking business and diverse loan financing 
structures like a loan in forty-eight (48) hours by Unique Trust Bank and internet banking to 
make loans easy to access. Thus firms are being exposed to more financing options than 
previously. It is crucial to determine how current issues in corporate governance affect the loan 
financing decisions of Ghanaian firms (customers) and the banks. This study specifically 
examines the relationship between various variables of corporate governance practices and the 
loan performance of twenty (20) banks using the loan loss provision from 2006 to 2013. 
5 
 
University of Ghana  http://ugspace.ug.edu.gh
1.3 Research Aim 
The main aim of this study is to assess the relationship between corporate governance practices 
and loan performance of banks in Ghana. 
 
1.4 Research objectives 
The study’s objective is to investigate the relationship between corporate governance practices 
and loan performance of banks in Ghana by considering the following specific objectives: 
i) To determine corporate governance practices which are related to the administration of 
bank loans 
ii) To use loan loss provisions to explain non-performing loans of banks in Ghana; 
iii) To determine the relationship between corporate governance practices of banks and the 
performance of bank loans. 
 
1.5 Research questions 
i) What are the corporate governance practices related to loan administration? 
ii) What are causes of the fluctuations in the trend of loan loss provisions of banks in 
Ghana? 
iii) What are the relationships between of corporate governance practices and loan 
administration of banks in Ghana? 
 
6 
 
University of Ghana  http://ugspace.ug.edu.gh
1.6 Significance of the study 
This research will establish the need for corporate governance in loan administration in banks. 
The banking sector regulator that is Bank of Ghana will be able to have a full understanding of 
the scope of corporate governance in banks with respect to loan performance of banks. For 
instance, the Bank of Ghana has increased the primary reserve ratio from 9% by 200 basis points 
to 11 % effective May 2014. This was done to limit the release of loans to customers which are 
non-performing over the years. By the central bank’s decision, commercial banks are now 
obliged to retain or deposit 11 % of their available funds in cash with the Central Bank to serve 
as a buffer in unforeseen default in loan payment in future which has a capacity to affect the 
financial strength of the banks. This decision was taken based on the loan loss provision of the 
commercial banks in Ghana in conjunction with the increase in inflation from 16% in February 
2015 to 16.5% in March 2015 with the cedi struggling with major foreign currencies (Bank of 
Ghana, 2015). This research helps in future decisions of the central bank in respect of the 
universal banking areas in Ghana.  
Banks will gain insights into the scope of corporate governance in loan administration. This 
study will help all the twenty-seven (27) existing commercial banks in Ghana as at 2014 to know 
how to strengthen or create new avenues to tighten their loan administration policies. All the 
commercial banks have different corporate governance practices and with this study, the in-
coming banks will better understand how to develop their credit policy to suit their aims and the 
Ghanaian market. In addition, banks and other financial institutions can use this research as a 
reference document for corporate governance practices in loan administration.  
7 
 
University of Ghana  http://ugspace.ug.edu.gh
The findings will serve as a reference point for students and researchers in this area or related 
areas of study since corporate governance in banks has been an under-studies in developing 
countries. The research gaps identified by this study will assist researchers in future studies. This 
research will be a reference document for academic conferences, seminars and group studies on 
loan administration and the corporate governance practices.  
 
1.7 Chapter disposition 
The research study is organized into five (5) chapters. Chapter one captures the background of 
the study, the problem statement, objectives of the study, the hypothesis statement, the 
significance of the study, the scope of the study, the organisation of the study and limitations. 
The second chapter reviews existing literature on corporate governance and its effect on loan 
performance of banks, as well as conceptual framework used in the study. The third chapter 
focuses on the part used to evaluate the corporate governance effect on loans performance in 
banks. These methods include research design, population sample frames, sampling techniques, 
model specifications, etc.  The next chapter is fourth which presents simple financial model 
based on regression and correlation to look at the relationship between corporate governance 
practices and loan administration. The last chapter looks at the contribution this study add to 
existing literature by summarising, concluding and making recommendations for current and 
future progress of banks in their loan administration.  
 
 
8 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER TWO 
LITERATURE REVIEW 
2.1 Introduction 
 
This section of the thesis reviews relevant and related literature on the subject matter. The 
purpose of this chapter is to examine secondary sources of data relevant to the topic such as 
academic papers, articles, journals, etc. and to set the tone for the background of this research 
work. It will explore areas such as the corporate governance practices of banks, bank loan 
management, and the supervisory role played by the central bank. It will go further to explain the 
nexus between corporate governance practices and its impact on bank loan management in 
Ghana. 
 
2.2 Corporate governance 
2.2.1 What is corporate governance? 
Corporate governance has been an issue of global concern long before now. Currently, 
academics and professionals have shown increasing interest in the study of corporate governance 
which enhances our knowledge of how corporate governance influences a firm’s management, 
strategies and performance (Sarbah, 2014). By definition corporate governance is the way in 
which the suppliers of finance to corporations assure each other of getting a return on their 
investment (Shleifer & Vishny, 1997). It can be defined as a system by which companies are 
directed and controlled (Cadbury, 1999). Corporate governance has also been defined as ‘a 
9 
 
University of Ghana  http://ugspace.ug.edu.gh
system of laws and sound approaches by which corporations are directed and controlled focusing 
on the internal and external corporate structures with the intention of monitoring the actions of 
management and directors and thereby mitigating agency risks which may stem from the 
misdeeds of corporate officers’ (Sifuna, 2012). It centres on the configuration of control  
mechanisms that attempt to limit problems arising from potential conflict  of  interest  between  
the  different  participants  in  the  firm,  managers,  shareholders, employees, creditors, etc. As a 
control mechanism, Jensen (1994) outlines four basic categories of corporate governance: (1) 
legal and regulatory mechanisms; (2) internal control mechanisms; (3) external control 
mechanisms; and (4) product market competition. 
 
The revised principles of corporate governance of the Organisation for Economic Co-operation 
and Development (OECD) (2004), explain corporate governance as a framework to coordinate 
the relationship between shareholders, board of directors, managers and other stakeholders.  
Specifically, corporate governance is divided into corporate governance structure and corporate 
governance process (Aboagye et al, 2012). Governance structures, which include ownership 
structure and board structure, are intended to discipline the behaviour of corporate governance 
actors. These actors include shareholders, regulators, auditors, directors and executive 
management.   
 
The governance practices refer to the interaction of governance actors based on governance 
structures. Hence, governance structures influence the effectiveness of governance practices and 
ultimately the firm’s performance.  Evidence from the literature suggests that good governance 
generates investor goodwill and confidence. Since they believe that the monies invested in the 
10 
 
University of Ghana  http://ugspace.ug.edu.gh
firm will not go waste. For example, Gompers et al. (2003) state that where there is good 
corporate governance it increases the firm’s valuations and boosts the bottom line. Claessens et 
al. (2002) also maintain that better corporate frameworks benefit firms through greater access to 
financing,  lower cost of capital, better performance and a more favourable treatment of all 
stakeholders. In the banking circles, (Zakaria, 2012) stated that proper corporate governance 
conduct may control and minimize the default (credit or loan risk) probability as well as ensuring 
good performance and maintaining high firm value. The default risk could arise due to excess 
leverage, poor financial performance and weak internal control practices. Sound corporate 
governance via its monitoring may help to mitigate default risk. 
 
The origin of corporate governance research can be traced back to 18th century and the work of 
Adam Smith’s (1776) work entitled “The Wealth of Nations”. Adam Smith argued that people in 
charge of other people’s money do not take as much precaution as they would with their own. 
The idea of separating the powers of owners and management or control was looked at by Berle 
and Means (1932) in their research paper. Jensen and Meckling (1976) brought an idea which 
can be described as the modern day theory on corporate governance. This modern theory on 
corporate governance integrated the agency theory, the theory of property rights and the theory 
of finance. 
 
Since its emergence, corporate governance has dominated the policy agenda in developed market 
economies for more than two decades, and it is gradually warming its way to the top of the 
policy agenda on the African continent. The Asian crisis and the relative poor performance of the 
11 
 
University of Ghana  http://ugspace.ug.edu.gh
corporate sector in sub-Saharan Africa have made corporate governance a catchphrase in the 
development debate (Berglof & von Thadden, 1999). 
 
It is commonly asserted that corporate governance is associated with larger companies and the 
existence of the agency problem. This agency problem arises as a result of the relationships 
between shareholders and managers. It comes about when members of an organisation have 
conflicts of interest within the firm. This may occur when there is mismanagement of funds at 
the expense of the owners of the firm. This is mainly due to the separation between the 
ownership and the control of the firm. 
 
It has been identified, in many studies that corporate governance has a positive influence on a 
business’s performance (Bebchuk & Cohen, 2004; Bebchuk, Cohen & Ferrell, 2004; Kyereboah-
Coleman & Biepke, 2006a; Kyereboah-Coleman & Biekpe, 2006b; Kyereboah Coleman, Biekpe 
2006c and Sarbah, 2014) and that poorly governed firms are expected to be less profitable, have 
more bankruptcy risks, lower valuations and pay out less to their shareholders. Others argue that 
weak corporate governance does not only lead to poor firm performance and risky financing 
patterns, but are also conducive to macroeconomic crises. 
 
 
 
 
 
 
12 
 
University of Ghana  http://ugspace.ug.edu.gh
2.2.2 Principles and components of corporate governance practices 
 
2.2.2.1. Principles guiding corporate governance practices 
 
The Organisation for Economic Co-operation and Development (OECD) published its 
‘Principles of Corporate Governance’ in 2004. These principles have become the standard 
principles guiding all corporate governance in recent years (Sarbah, 2014). These are: 
 Rights of shareholders: The corporate governance framework should protect 
shareholders and facilitate their rights in the company. Companies should generate 
investment returns for the risk capital put up by the shareholders.  
 Equitable treatment of shareholders: All shareholders should be treated equitably 
(fairly), including those who constitute a minority, individuals and foreign shareholders. 
Shareholders should have redress when their rights are contravened or where an 
individual shareholder or group of shareholders is oppressed by the majority.  
 Stakeholders: The corporate governance framework should recognise the legal rights of 
stakeholders and facilitate cooperation with them in order to create wealth, employment 
and sustainable enterprises.  
 Disclosure and transparency: Companies should make relevant, timely disclosures on 
matters affecting financial performance, management and ownership of the business.  
 Board of directors: The board of directors should set the direction of the company and 
monitor management in order that the company will achieve its objectives. The corporate 
governance framework should underpin the board’s accountability to the company and its 
members. 
13 
 
University of Ghana  http://ugspace.ug.edu.gh
Rights of 
Shareholders
Disclosure and 
Stakeholders
Transparency
Corporate 
Governace 
Practices
Equitable 
Board of 
treatment of 
Directors
shareholders
 
Figure 2. 1: The five basic principles guiding corporate governance practices 
 
2.2.2.2. Approaches to corporate governance practices 
 
Most organisations or countries adopt a principles-based approach to corporate governance 
(ACCA, 2013). This involves establishing a comprehensive set of best practices to which listed 
companies should adhere. If it is considered to be in the best interests of the company, not to 
follow one or more of these standards, the company should disclose this to its shareholders, 
along with the reasons for not doing so. This does not necessarily mean that a principles-based 
approach is a soft option, however, as it may be a condition for membership of the stock 
exchange so that companies strictly follow this ‘comply or explain’ requirement. 
 
14 
 
University of Ghana  http://ugspace.ug.edu.gh
Some countries prefer a rules-based approach through which the desired corporate governance 
standards are enshrined in law and are therefore mandatory. The best example of this is the US, 
where the Sarbanes-Oxley Act lays down detailed legal requirements. 
 
 APPROACHES 
1. Principle based TO 2. Rule-based 
Approach (eg. CORPORATE Approach (eg. 
 Combined Code, UK) GOVERNANCE Sarbanes Oxley Act, 
PRACTICES US) 
 
Figure 2. 2: Approaches to corporate governance practices 
 
2.2.2.3 Components of corporate governance practices 
1 •Board of Directors
2 •Credit Committee (Executive Management)
3 •Lending Units
4 •Relationship Management
5 •Credit Risk Management
6 •Credit Monitoring 
7 •Credit Approval Limits
8 •Legal team
9 •Audit committee
10 •Bank of Ghana
Figure 2. 3: The elements of corporate governance practices in relation to loan performance 
15 
 
University of Ghana  http://ugspace.ug.edu.gh
2.2.2.3.1 Board of directors 
 Why the board? 
The board of directors is the supreme governing body of a bank. The board is responsible for 
setting the strategic direction of a bank and overseeing the risk management policies of a bank. 
The board of directors is appointed by the shareholders of a bank. The board has the ultimate 
responsibility for the manner in which the operations/business of a bank is conducted. Among its 
responsibilities are: appointing senior management, establishing operational policies and, above 
all, taking responsibility for ensuring the soundness of a bank.  
 
A board must be strong, independent and actively involved in the activities of a bank. Although a 
bank’s directors may not be experts in banking, it is important that they have the skills, 
knowledge, and experience to enable them perform their duties effectively. The board oversees 
and supports management efforts, tests and probes recommendations before approving them. It 
should make sure that adequate controls and systems are in place to identify and address 
concerns before they become major problems. During bad times, a board that is active and 
involved can help a bank survive if it is able to evaluate problems, take corrective actions, and 
when necessary, keep the institution on track (Greuning & Bratanovic, 2003). No single 
individual should be able to dominate decision making. It follows that the board should work as 
a team with outside members contributing to strategy rather than simply having a monitoring or 
policing role. Boards need to comprise of members who possess skills and experience 
appropriate for the organisation. All board members should endeavour to acquire a level of 
16 
 
University of Ghana  http://ugspace.ug.edu.gh
understanding of financial matters that will enable them to participate in decisions regarding the 
organisation. 
 
In summary, the board of directors have the following responsibilities: select competent 
executive officers; evaluate and compensate them accordingly; review and approve the 
management-developed strategy i.e. approve the overall risk-appetite of the institution; monitor 
the control of the environment; ensure that the necessary corrective actions are taken to remedy 
the situation; ensure the compliance of the institution with its legal and regulatory requirements; 
select competent board members; and establish guidelines to govern the organisation and its 
structures.  Directors are to perform these functions in the best interest of the shareholders and 
other stakeholders. 
 
 Ideal size of the board 
What is the optimal size of a board of directors? The right answer can be found in a look at the 
function of the organisation, the size of its assets and the board’s culture (Todd, 2012). 
The average board size is 19 and the median is 17 (Board Source Non-profit Governance Index, 
2010). The non-profit organisations with budgets of $10 million or more have an average of 18 
members and those with less than $1 million typically have 14 members. Bain Capital (2011) 
asserts that the optimal board size for effective decision making is seven (7) people. Bain Capital 
Survey suggests that, ‘every person added after that decreases decision-making ability by 10 
percent’. So for boards with the median of 17 people, Bain Capital would put their decision-
making ability at zero. Corporate Library's Study (2009) puts the average board size to 9.2 
17 
 
University of Ghana  http://ugspace.ug.edu.gh
members and most boards range from 3 to 31 members but admit that other analysts think the 
ideal size is seven. 
 
While a smaller board size does reflect new thinking about board functioning, many boards work 
extremely well with 17-22 people and do not buy into Bain Capital’s assertion. So the ideal size 
of a corporate entity’s board is dependent on so many factors, like the cost of maintaining a 
board, organisational size etc. 
 
 Board size and loan performance 
Large boards can be less effective than small boards (Jensen, 1993; Lipton & Lorsch, 1992). The 
issue is that when the size of a bank’s board becomes too big, agency problems (such as director 
free-riding) increase within the board and the board becomes more symbolic and less a part of 
the management process (Yermack, 1996). Yermack (1996) drew a relationship between Tobin’s 
Q and board size on a sample of large U.S. corporations, controlling for other variables that are 
likely to affect Q. His results suggest that there is a significant negative relationship between 
board size and Q.  
 
Eisenberg et al. (1998) confirmed that a similar pattern holds for a sample of small and midsized 
Finnish firms. Their data therefore appear to reveal a fairly clear picture: board size and firm 
value are negatively correlated. 
 
18 
 
University of Ghana  http://ugspace.ug.edu.gh
Another measure of the importance of board size is how participants in the marketplace view it. 
Gertner and Kaplan (1996) use a novel approach to examine the boards of a sample of reverse-
leveraged buyouts. Their idea is that these firms are more likely than ongoing public firms to 
choose a value-maximizing board. Gertner and Kaplan find that, in this sample, boards tend to be 
smaller than in otherwise similar firms. Market participants seem to think that small boards do a 
better job of monitoring management than do large boards. 
 
Although striking, these results nevertheless raise some questions (Cue et al., 2011). For 
instance, why, if they are destructive to firm value, do we see large boards? Perhaps large boards 
are uniformly bad because size exacerbates some free-riding problems among directors vis-à-vis 
the monitoring of management. These issues are pertinent to the success or failure of loan 
agreement and its performance which is an ingredient of banks annual performance. 
 
 Structure of the board 
The board of directors is made up of executive directors and non-executive directors. Executive 
directors are full-time employees of the company and, therefore, have two relationships and sets 
of duties. They work for the company in a senior capacity, usually concerned with policy matters 
or functional business areas of major strategic importance. Large companies tend to have 
executive directors responsible for finance, IT/IS, marketing and so on. 
Executive directors are usually recruited by the board of directors. They are the highest earners 
in the company, with remuneration packages made up partly of basic pay and fringe benefits and 
partly performance-related pay. Most large companies now engage their executive directors 
19 
 
University of Ghana  http://ugspace.ug.edu.gh
under fixed term contracts, often rolling over every 12 months. The chief executive officer 
(CEO) and the finance director (in the US, chief financial officer) are nearly always executive 
directors. Non-executive directors (NEDs) are not employees of the bank and are not involved in 
its day-to-day running. They usually have full-time jobs elsewhere, or may sometimes be 
prominent individuals from public life. The non-executive directors usually receive a flat fee for 
their services, and are engaged under a contract for service (civil contract, similar to that used to 
hire a consultant). They give expert advice on the running of the bank, and other responsibilities 
as agreed by the shareholders. 
 
 Board structure and loan performance 
The most widely discussed question regarding boards is whether having more non-executive 
directors increase banks’ performance? A number of papers have addressed this question using 
several methods. The first method has been to examine contemporaneous correlations between 
accounting measures of performance and the proportion of outside directors on the board. 
MacAvoy et al. (1983), Hermalin & Weisbach (1991), Mehran (1995), Klein (1998), Abor 
(2008), Bhagat & Black (2000) all report insignificant relationships between accounting 
performance measures and the fraction of outside directors on the board. A second approach, 
suggested by the work of Morck et al. (1988), is to use Tobin’s Q as a performance measure, the 
idea being that it reflects the ‘value added’ of intangible factors such as governance. Hermalin 
and Weisbach (1991) and Bhagat and Black (2000) use this approach and find, as with 
accounting performance measures, that there is no noticeable relationship between the proportion 
of outside directors and Q. Finally, Bhagat and Black (2000) examine the effect of board 
composition on long-term stock markets and accounting performance. Once again, they do not 
20 
 
University of Ghana  http://ugspace.ug.edu.gh
find any relationship between board composition and firm performance. Overall, there is little to 
suggest that board composition has any cross-sectional relationship to firm performance. 
 
An important issue to consider when evaluating these studies is the endogeneity of board 
composition. Hermalin and Weisbach (1998) suggest that poor performance leads to increases in 
board independence. In a cross-section, this effect is likely to make firms with independent 
directors look worse, because this effect leads to more independent directors on firms with 
historically poor performance. Both Hermalin and Weisbach (1991) and Bhagat and Black 
(2000) have attempted to correct for this effect using simultaneous-equation methods.  
 
In particular, these papers logged past performance as an instrument for current performance. 
Still, even correcting for endogeneity in this manner, there does not appear to be an empirical 
relationship between board composition and firm performance.  
 
A somewhat more successful approach has been to measure the impact on firm value through 
changes in board composition. Rosenstein and Wyatt (1990) examine the stock price reaction on 
the day of the announcement that outside directors will be added to the board. They find that on 
average there is a statistically significant 0.2 percent increase in stock prices in response to the 
announcement of these appointments.  
 
In many ways, the Rosenstein and Wyatt approach is a cleaner test of the relationship between 
board composition and ultimate value than the other studies considered above; the Rosenstein 
21 
 
University of Ghana  http://ugspace.ug.edu.gh
and Wyatt approach controls for all firm-specific effects and tests directly for the desired effect. 
Controlling for firm-specific effects is critical because as Hermalin (1994) predicts and Kole 
(1997) and Hermalin and Wallace (forthcoming) confirm, there is no reason to imagine that a 
specific board composition (for example, percentage of outsiders) is optimal for all firms. Hence, 
the impact of board composition on performance could be difficult to identify cross-sectionally. 
 
However, there is a potential drawback to the Rosenstein and Wyatt approach. Presumably, firms 
change their board structure to improve their operations and, thus, ultimately their value. Thus, 
all change announcements, to the extent that they are unexpected, should cause a positive change 
in the stock price. If this is true, then the Rosenstein and Wyatt results tell us nothing about the 
value of outsiders per se. Yet if only the addition of outsiders increased firm value, while other 
changes are neutral or lowered firm value, then we have to ask why this is allowed to happen and 
why firms do not continually add outsiders to boost value. In their follow-up paper, Rosenstein 
and Wyatt (1997) address some of these concerns. Overall, they find no definitive effect of 
adding an insider to the board. In some specifications, however, they find that adding an insider 
increases the stock price. Hence, the original Rosenstein and Wyatt effect could, as we have 
suggested, simply reflect value increase associated with the change, rather than anything in 
particular about outsiders. This shows the overall effects of the board structure on the general 
performance of a bank which includes loan performance. 
 
 
 
22 
 
University of Ghana  http://ugspace.ug.edu.gh
 Power separation 
It is generally recognized that the CEO should not hold the position of chairman, as the activities 
of each role are quite distinct from each another. In larger companies, there would be too much 
work for one individual, though in Marks & Spencer, a large listed UK retail organisation, one 
person did occupy both positions for several years (ACCA, 2013). 
 
Probably the most important factor determining a board’s effectiveness is its independence from 
the CEO. Independence from the CEO’s influence is the underlying factor in many discussions 
of boards and their relationship with management.  
 
However, this variable is fundamentally unobservable, and this is an important reason why 
empirical work on boards of directors is a challenging topic. A number of recent papers have 
addressed the power struggle between the board and the CEO empirically in creative ways. 
Hallock (1997, 1999) examines board interlocks, which occur when a firm’s employee sits on 
another firm’s board and that firm’s employee sits on the first firm’s board. These employees are 
generally the CEO or another person high in management in their respective firms. Given this 
type of relationship, the potential for collusive or quid pro quo behaviour on the part of the 
‘interlocked’ directors is particularly high. Hallock documents that the prevalence of interlocking 
directorships is too high to be explained by random chance. In addition, he finds that CEOs with 
interlocking boards get paid more than otherwise similar CEOs. These findings are consistent 
with the view that interlocking directorships provide the CEO a degree of control over his board 
or, at the very least, that the CEO has the bargaining power to obtain a friendly board. Shivdasani 
23 
 
University of Ghana  http://ugspace.ug.edu.gh
and Yermack (1999) examine the extent to which the CEO is involved in the board-selection 
process. This is an interesting empirical exercise because case-study evidence suggests that 
CEOs play an important role in selecting new board members (Mace 1986; Lorsch & MacIver 
1989) and because theoretical work implies that the role of the CEO in choosing directors can 
have an impact on the board’s effectiveness (Hermalin & Weisbach 1998).  Shivdasani and 
Yermack construct a measure of CEO involvement in the selection process based on whether the 
board has a separate nominating committee, and conditional on such a committee existing, 
whether the CEO is on it. The authors find that this measure of CEO involvement decreases the 
firm’s subsequent number of independent directors. Shivdasani and Yermack’s results are 
consistent with the view that, at least in some firms, the CEO is able to use his control over the 
selection process to decrease the board’s independence. Baker and Gompers (2000) examine the 
board-selection process in a large sample of initial public offerings. They test whether factors 
that are plausibly related to CEO bargaining power influence the selection of board members. In 
particular, they argue that CEO tenure and CEO voting stake, as measured by its Shapley value, 
are likely to be positively related to CEO bargaining power. 
 
In contrast, the presence of a venture capital investor, especially one with a strong reputation, is 
likely to decrease the CEO’s bargaining power relative to the board. Empirically, Baker and 
Gompers find that, consistent with the bargaining framework, CEO tenure and CEO Shapley 
value are positively related to the number of insiders on the board, while the number of insiders 
decreases with the reputation of the venture capitalist financing the firm. 
 
24 
 
University of Ghana  http://ugspace.ug.edu.gh
Overall, the literature has documented a number of facts about board dynamics. These facts can 
be explained reasonably well by a bargaining framework such as Hermalin and Weisbach (1998). 
Interested parties’ control of the board appears to be a function of their bargaining power. When 
banks’ financial claims become more uncertain and their legal rights in bankruptcy courts 
therefore become stronger, their representation on boards increases (Gilson 1990; Kaplan & 
Minton 1994; Morck & Nakamura 1999). After a period of good performance, when a CEO’s 
perceived value relative to a potential replacement is likely to be high, he is able to add more 
insiders to the board (Hermalin & Weisbach 1988; Denis & Sarin 1999). Finally, direct measures 
of a CEO’s bargaining position such as his voting stake, the use of interlocks, his representation 
on the nominating committee, and his dealings with venture capitalists appear to affect board 
composition in ways consistent with the bargaining framework (Hallock 1997, 1999; Shivdasani 
& Yermack 1999; Baker & Gompers, 2000). 
 
The secretary should not also be the chairman of the company. As the secretary has a key role in 
liaising with the government registration body, having the same person occupying both roles 
could compromise the flow of information between this body and the board of directors. 
 
2.2.2.3.2 Credit committee  
 
The Credit Committee exercises the Board’s responsibilities on credit and credit related matters 
in line with its delegated limit. In most of the sampled banks, there are representatives of the 
board on the credit committee. The credit committee comprises mainly executive and 
25 
 
University of Ghana  http://ugspace.ug.edu.gh
management committee members as well as officers connected with loan administration, 
monitoring and recoveries. 
 
The Management credit committee performs among others the following duties: 
 Recommend to the board the credit risk inherent in every loan application.  
 Recommend innovative financial and credit products to the Board for approval. 
 Propose credit approval authority levels to the Board. 
 Establish effective credit pricing policies. 
 Periodic review of credit portfolio.   
 Approve credits within its delegated limits. 
In most of the banks, a facility request is expected to include comments from areas of risk 
management with respect to the following risk: 
 Credit risk 
 Legal risk 
 Liquidity risk 
 Market risk 
 Accounting and financial reporting  
 Operational risk 
This will ensure that the relevant issues surrounding the facility pertaining to these areas have 
been properly examined and that satisfactory mitigation measures are in place.  
 
To encourage greater accountability on the credit committee, individual reservations and 
dissensions should be recorded in the Minutes. 
 
26 
 
University of Ghana  http://ugspace.ug.edu.gh
2.2.2.3.3 Lending units (LUs) 
 
The banks have lending units responsible for the granting of loans in accordance with their 
authority limits and credit policy statements.  
Thus the lending units are basically responsible for: 
 Making credit recommendations within their limits as approved by their boards. 
 Managing relationships and portfolios of banks. 
 
Lending units’ credit proposals are submitted to their credit risk management for appraisal and 
approval within their limits, or recommendation to the next level of authority. 
2.2.2.3.4 Relationship management  
 
The relationship manager has the primary responsibility for credit relationship management in a 
lending unit. He/she sponsors and analyses credits, negotiates with the customer, monitors and 
renders adequate credit reviews, account maintenance, security documentation and other credit 
related issues as they pertains to his/her unit. Thus they originate and manage credit 
relationships. Other responsibilities include the following: 
 Developing marketing plan and budget for individual accounts. 
 Business development. 
 Credit collection. 
 Documentation and disbursement management. 
 Monitoring of Accounts. 
 Monitoring and problem loan recognition. 
 
Therefore, a successful credit management must of necessity involve a series of tasks to be 
performed at the right time and with initiative. This will help in the timely detection of threats 
and the prompt identification of appropriate effective containment and remedial action(s). 
In broad terms, the monitoring activity of the Relationship Manager will ensure that: 
27 
 
University of Ghana  http://ugspace.ug.edu.gh
 Funds advanced are used only for the purpose stated in the customer’s credit application; 
 Financial condition of a borrower is regularly tracked and management advised in a 
timely fashion; 
 Borrowers are complying with contractual covenants; 
 Collateral coverage is regularly assessed and related to the borrower’s financials; 
 The institution’s internal risk ratings reflect the current condition of the customer; 
 Contractual payment delinquencies are identified and emerging problem credits are 
classified on a timely basis and 
 Problem credits are promptly directed to management for remedial actions. 
 
2.2.2.3.5 The credit risk management department 
 
The credit risk management department is the custodian of a Bank’s credit processes and has the 
primary responsibility of evolving the Bank’s credit policies and strategies and also 
implementing the decisions of the board, the credit committee and the executive management in 
the delivery of credit products and services. 
 
The credit risk management department independently reviews all proposals emanating from the 
lending units with an element of credit risk to ensure that optimal decisions are taken and that 
such decisions when taken are in compliance with a bank’s credit policies.  
 
Specifically, the responsibilities of the department include the following: 
 Problem loan avoidance through the independent review or concurrence and rating of the 
credit risk attached to each credit facility and exposure without which an approval is 
incomplete or not valid. 
 Ensuring compliance with the provisions of a bank's credit policy. 
28 
 
University of Ghana  http://ugspace.ug.edu.gh
 Ensuring compliance with Banking Act, 2004 (Act 673) as amended by Banking 
(Amendment) Act, 2007 (Act 738) and the Bank of Ghana’s guidelines for reporting 
institutions. 
 Review of a bank's credit policy in line of changing trends and legislations. 
 Review of credit documentation and approving disbursements. 
 Ensuring the adequacy, maintenance and safety of credit information. 
 Determining the credit risk appetite of a bank. 
 Monitoring and tracking of post approval account performance, through covenants in 
facility letters.  
 
2.2.2.3.6 Credit monitoring  
 
The banks have a specific unit within the credit risk management department responsible for 
monitoring of credit portfolios. The unit is primarily responsible to review a bank’s risk assets on 
a post approval basis with a view to: 
 Ensure the performance of the risk assets portfolio of a bank.  
 Improve on a bank’s credit process by identifying process lapses. 
 Review the ageing analysis and the classifications based on the performance of the 
accounts.  
 
In addition to the monitoring unit within banks, there is a committee responsible for credit 
monitoring which preside over all problem loans or classified accounts with the following 
characteristics: 
 Expired but unpaid facilities; 
 Accounts with repayment(s) in arrears; 
 Accounts operating consistently above approved limits 
 Accounts placed on the early alert list 
29 
 
University of Ghana  http://ugspace.ug.edu.gh
 
2.2.2.3.7 Credit approval limits 
 
The credit approval limits for all levels within the credit management structure of a bank which 
clearly documents the approval limits of officials in accordance with the authority level and 
functions within a bank. 
 
2.2.2.3.8 Legal team 
 
Banks have a legal department responsible for the perfection of securities before loans are 
granted. The legal department has to authorise for a draw down request from the credit risk 
management department before the credit risk management department can authorise for a 
customer to draw down a facility. The Legal Department does the approval when conditions for 
draw down have been met.  
 
2.2.2.3.9 Audit committee 
 
Banks have an audit committee with direct responsibilities to the board. The committee   usually 
consist of membership from the board, the internal control department, the accounting and the 
finance department. It is the board’s responsibility to review the reports of independent auditing 
firms. Such reviews should include: scope of audit and auditor’s conclusions, adequacy of the 
bank’s internal controls and actions needed to correct existing deficiencies and solve problems, 
and the bank’s compliance with laws and regulations. 
30 
 
University of Ghana  http://ugspace.ug.edu.gh
 Functions of audit committees 
Surrey Bancorp (2009) identified the following functions for audit committees which affects loan 
management and performance: 
 Authority of audit committee.  
The board of directors hereby delegates to the committee, in its capacity as a committee of the 
board, the sole authority to engage, determine the compensation of, and provide oversight to the 
independent accounting firm engaged to prepare and issue an audit report (and related work) for 
the company, which firm shall report directly to the committee (Universal Merchant Bank, 
2014). The committee shall approve in advance any permissible non-audit services provided by 
the independent accountants. The committee may delegate to the chair and/or one or more other 
designated members of the committee the authority to grant pre-approvals of permissible non-
audit services. Any such pre-approvals shall be presented to the full committee at its next 
scheduled meeting. The committee shall have the authority to engage independent counsel and 
other advisors, as the committee determines necessary to perform its functions (Universal 
Merchant Bank, 2014). The committee shall also resolve disagreements, if any, between 
management and the independent auditor to assure compliance with laws and regulations. 
 Plan of audit 
The committee shall consult independent external auditor regarding the plan of audit. The 
committee also shall review with the independent accountants their report on the audit and 
review with management the independent accountants’ suggested changes or improvements in 
the company’s accounting practices or controls 
31 
 
University of Ghana  http://ugspace.ug.edu.gh
 Accounting principles and disclosures 
The committee reviews significant developments in accounting rules. The committee shall 
review with management recommended changes in the company’s methods of accounting or 
financial statements. The committee also shall review with the independent accountants any 
significant proposed changes in accounting principles and financial statements. 
 Internal accounting controls 
The committee shall consult with the independent accountants regarding the adequacy of internal 
accounting controls. Where appropriate, consultation with the independent accountants regarding 
internal controls shall be conducted out of management’s presence. In connection with this 
function, the committee may require the company’s counsel to circulate a questionnaire to 
evaluate the company’s compliance with banking, financial disclosure and accounting laws. 
 Financial disclosures document 
The committee shall review with management and the independent accountants the company’s 
financial disclosure documents, including all financial statements and reports filed with the 
securities and exchange commission (or the company’s primary federal securities regulator), or 
sent to stockholders and, following the satisfactory completion of each year-end review, 
recommend to the board the inclusion of the audited financial statements in the company’s filing 
on Form 10-K (or Form 10-KSB). The review shall include any significant problems and 
material disputes between management and the independent accountants and a discussion with 
the independent accountants out of management’s presence of the quality of the company’s 
accounting principles as applied in its financial reporting, the clarity of the company’s financial 
32 
 
University of Ghana  http://ugspace.ug.edu.gh
disclosures and degree of aggressiveness or conservatism of the company’s accounting principles 
and underlying estimates, and a frank and open discussion of other significant decisions made by 
management in preparing the financial disclosure. 
 Internal Control systems 
The committee shall review with management and internal auditors the company’s internal 
control systems intended to ensure the reliability of financial reporting and compliance with 
applicable codes of conduct, laws, and regulations. The review shall include any significant 
problems and regulatory concerns. The committee also shall review internal audit plans in 
significant compliance areas 
 Ethical environment 
The committee shall consult with management on the establishment and maintenance of an 
environment that promotes ethical behaviour, including the establishment, communication, and 
enforcement of codes of conduct to guard against dishonest, unethical, or illegal activities. 
 Oversight of executive officers and directors and conflicts of interest.  
The committee shall review significant conflicts of interest involving directors or executive 
officers. The committee shall review compliance with company policies and procedures with 
respect to officers’ expense accounts and perquisites, including their use of corporate assets, and 
consider the results of any review of these areas by the internal auditor or the independent 
accountant. The committee shall review executive officers’ and directors’ loan and deposit 
relationships and consider the results of any review of these areas by the internal auditor or the 
independent accountant. The committee also shall review significant questionable or illegal 
payments. 
33 
 
University of Ghana  http://ugspace.ug.edu.gh
 Oversight of independent accountants 
The committee shall evaluate the independent accountants on an annual basis and, where 
appropriate, replace for the independent accountants. In such evaluation, the committee shall 
ensure that the independent accountants deliver to the committee a formal written statement 
delineating all relationships between the accountants and the company. The committee also shall 
engage in a dialogue with the accountants with respect to any disclosed relationships or services 
that may impact the objectivity and independence of the independent accountants and in 
response to the independent accountant’s report take appropriate action to satisfy itself of the 
independent accountant’s independence. 
 Adequacy of personnel 
The committee shall review periodically the adequacy of the company’s accounting, financial, 
and auditing personnel resources. 
 Risk management 
The committee shall review and evaluate risk management policies in light of the company’s 
business strategy, capital strength, and overall risk tolerance. The committee also shall evaluate 
on a periodic basis the company’s investment and derivatives risk management policies, 
including the internal system to review operational risks, credit risks, interest rate risks, 
procedures for derivatives investment and trading, and safeguards to ensure compliance with 
procedures. 
 
 
34 
 
University of Ghana  http://ugspace.ug.edu.gh
 Tax policies 
The committee shall review periodically the company’s tax policies and any pending audits or 
assessments. 
 Offerings of securities 
The committee shall perform appropriate due diligence on behalf of the board of directors with 
respect to the company’s offerings of securities. 
 Charter amendments 
The committee shall review this charter annually, assess its adequacy and propose appropriate 
amendments to the Board. 
 Complaint procedures 
The committee shall establish procedures to receive complaints or concerns regarding accounting 
or auditing matters and investigate any matter brought to its attention within the scope of its 
duties. 
 Issue tracker procedures 
The committee shall review the Issue Tracker to track outstanding audits and examinations 
issues. The above must be looked at. The sections read as official documents and if they are, they 
must be acknowledged. 
 
35 
 
University of Ghana  http://ugspace.ug.edu.gh
 
 
2.2.2.3.10 The central bank and loan management 
 
The Bank of Ghana being the central Bank of the republic of Ghana is charged with the 
responsibility of seeing to it that the universal banks conduct themselves within the framework of 
rules and regulations that govern their activities.  It enforces relevant regulatory provisions which 
have extensive sanctions available to impose on banks such as fines, revocation of license (in 
extreme cases), variations in the terms and conditions of licensing, as well as civil and criminal 
penalties for non-compliance.  
 
Banking supervision in Ghana entails an on-going monitoring of overall operations of banks and 
the enforcement of banking regulations and policies with the objective of promoting the safety, 
soundness and stability of banks and the banking system. Banking supervision in Ghana also 
ensures that monetary and banking guidelines are complied with and to guarantee monetary 
stability in the economy. Furthermore, banking supervision seeks to promote efficiency and 
competition among banks in Ghana. 
The central bank of Ghana does the supervisory function through its monitoring department 
called the Banking Supervision Department (BSD). The BSD requires commercial banks to 
submit periodic returns on a daily, weekly, fortnightly, monthly, quarterly, semi-annually, yearly 
and on as and when basis so as to monitor and sanction banks appropriately. BSD 4 deals with 
the sectorial analysis of overdrafts, loans and other advances. The BSD has categorised nine (9) 
sectors of the economy for reporting and these sectors are: 
 
36 
 
University of Ghana  http://ugspace.ug.edu.gh
 Agriculture, forestry & fishing 
 Mining  & quarrying 
 Manufacturing 
 Construction 
 Electricity, gas & water 
 Commerce & finance 
 Transport, storage & communication 
 Services 
 Miscellaneous 
Banks are to report advances granted to customers in line with the above sectors and are to 
indicate in columnar form whether such customers are: 
 Central government 
 Public institutions 
 Public enterprises 
 Commercial banks 
 Other depository institutions 
 Other financial institutions 
 Private  corporations 
 Households, and 
 Non-Profit Institutions Serving Households (NPISH) 
37 
 
University of Ghana  http://ugspace.ug.edu.gh
The BSD wants to assure itself of the risk profile of the sector as well as the type of customers 
banks lend to. For instance a loan to the Electricity Company of Ghana is not as risky as a loan to 
a farmer engaged in tree crops because the demand in power is high and also it takes a longer 
period for the farmer to harvest tree crops such as cocoa. Secondly the Electricity Company of 
Ghana as a public enterprise is less risky than a private corporation engaged in farming. Thus the 
BSD will ensure that banks allocate more capital for risky loans than to those of less risk. 
 
In addition, BSD requires banks to segregate loans granted to the above customers into 
performing and non-performing loans in order to make a realistic analysis and to monitor banks 
appropriately. Performing loans are current and OLEM (i.e. other loans exceptionally 
mentioned). Current loans are advances granted within one (1) to thirty (30) days while OLEM 
are advances granted after thirty (30) days but less than or equal to ninety (90) days. Non-
performing loans are substandard, doubtful and loss. Substandard loans are advances outstanding 
beyond ninety (90) days but less than or equal to one hundred and eighty (180) days. Doubtful 
loans are advances outstanding beyond one hundred and eighty (180) days, but lees than or equal 
to three hundred and sixty (360) days. Loss loans are advances beyond three hundred and sixty 
(360) days. 
 
BSD 5 deals with the capital adequacy ratio (CAR) which is measured as a proportion of a bank's 
adjusted capital over its risk-weighted assets. The minimum capital adequacy ratio required by 
the central bank is 10%. The most risky and volatile assets of a bank are loans and as such the 
central bank requires that more capital should be allocated to risky loans than to less risky loans. 
Thus loans to public enterprises such as the Electricity Company of Ghana attracts a risk-weight 
38 
 
University of Ghana  http://ugspace.ug.edu.gh
of 100% while loans to public institutions such as the Volta River Authority attracts a risk-
weight of 50%. The implication is that the more risky an asset the more required of a bank to 
provide adequate capital to cover the risk in order to ensure that the bank meets the minimum 
capital adequacy ratio. 
 
BSD 8 deals with advances subject to adverse classification which categorise advances into 
current, OLEM, substandard, doubtful and losses. This is to enable the BSD to determine 
whether a bank has made adequate provision in its records regarding its classes of advances. 
Thus the provision made in a bank's books will be reconciled with the required provision in BSD 
8. Advances of current nature attracts 1% provision, OLEM 10%, Substandard 25%, doubtful 
50% and loss 100%.  
 
Board appointment is central to good governance practice. It is required by the Bank of Ghana 
that board members must consist of individuals who have both generic attributes and specific 
skills to support the policy formulation, decision-making and oversight process in relation to the 
full scope of board responsibilities (Quigley & Scott, 2004). Because the corporation’s need for 
particular backgrounds and experiences may change over time, the board should monitor the mix 
of the skills and experience of its directors in order to assess, at each stage in the life of the 
business, whether the board has the necessary tools to perform its oversight function effectively. 
 
Considering the significant contribution that good corporate governance can make to the 
achievement of the above objectives, the Bank of Ghana has considered it appropriate to 
formulate and enunciate its position on the matter.  The central bank has also considered it 
39 
 
University of Ghana  http://ugspace.ug.edu.gh
appropriate to issue guidance notes on how loans management should be taken serious with 
respect to the corporate governance of each bank in Ghana. In doing this, the Bank of Ghana, 
considers so many things such as the state of development of the banking market in Ghana, the 
regulatory framework and the domestic corporate culture and circumstance and whether the 
principles of corporate governance could be implemented in the Ghanaian context.   
 
2.3 Tools for controlling commercial banks loans 
The monetary policy role played by the Bank of Ghana are measures employed by governments 
to influence economic activity, specifically by manipulating the supplies of money and loans and 
by altering rates of prime interest rates which affects the commercial banks.  
 
The main goals of these monetary policies are to achieve or maintain full employment, to 
achieve or maintain a high rate of economic growth, and to stabilize prices and wages. Until the 
early 20th century, a monetary policy was thought by most experts to be of little use in 
influencing the economy, but recent researches have proved that central banks do more than 
fulfil their traditional role. Inflationary trends have caused government to adopt measures that 
reduced inflation by restricting growth in the money supply thus the monitoring of loans of 
commercial banks. 
 
The Bank of Ghana uses three main instruments in regulating the money supply:  
Open-market operations, the discount rate, and reserve requirements. The first is by far the most 
important.  
 
40 
 
University of Ghana  http://ugspace.ug.edu.gh
 Open market operations 
The central bank buys or sells government securities (or bonds) to affect the money supply and 
interest rates. If, for example, the Bank of Ghana buys government securities, it pays with a 
cheque drawn on itself. This action creates money in the form of additional deposits from the 
sale of the securities by commercial banks. By adding to the cash reserves of the commercial 
banks, then, the central bank enables those banks to increase their lending capacity. 
Consequently, the additional demand for government bonds bids up their price and thus reduces 
their yield (i.e., interest rates). The purpose of this operation is to ease the availability of credit 
and to reduce interest rates, which thereby encourages businesses to invest more and consumers 
to spend more. The selling of government securities by the central bank achieves the opposite 
effect of contracting the money supply and increasing interest rates. 
 
 Discount rate 
The second tool is the discount rate, which is the interest rate at which the central bank lends to 
commercial banks. An increase in the discount rate reduces the amount of lending made by 
banks. In most countries the discount rate is used as a signal, in that a change in the discount rate 
will typically be followed by a similar change in the interest rates charged by commercial banks. 
 
 Reserve requirements  
Commercial banks by law hold a specific percentage of their deposits as required reserves with 
the central bank. These are held either in the form of non-interest-bearing reserves or as cash. 
This reserve requirement acts as a brake on the lending operations of the commercial banks by 
increasing or decreasing this reserve-ratio requirement. The Bank of Ghana can influence the 
41 
 
University of Ghana  http://ugspace.ug.edu.gh
amount of money available for lending and hence the money supply. This tool is rarely used, 
however, because it is so blunt. In Ghana the reserves requirement used to be 9% until May 2014 
when the Bank of Ghana increased it to 11%. The Bank of England and most other central banks 
also employ a number of other tools, such as the ‘treasury directive’ regulation of instalment 
purchasing and special deposits. 
 
2.4 Difficulties associated with corporate governance 
Recent developments show clearly that there are many problems with the organisation of many 
corporate boards.  Some of the problems are: lack of independence of directors, vested interests, 
inadequate time, and sometimes lack of expertise to carry out their obligations to shareholders. In 
a nutshell, experiences from the Enron (2002) scandal and the 2008-2009 economic recessions 
exhibit the following weaknesses in corporate governance:   
 Fraudulent and self-serving practices among members of the board, management and 
staff.   
 Weak internal controls. 
 Non-compliance with laid-down internal controls and operational procedures.  
 Poor risk management practices resulting in a large quantum of non-performing credits 
including insider-related credits.  
 Abuses in lending, including lending in excess of single obligor limit.  
 Sit-tight directors even where such directors fail to make meaningful contributions to the 
growth and development of the bank.  
 Technical incompetence, poor leadership and administrative ability. 
42 
 
University of Ghana  http://ugspace.ug.edu.gh
  Inability to plan and respond to changing business circumstances. 
 Ineffective management information systems. 
For a board of directors to operate optimally there is the need for independence.  But such 
independence is often compromised because of the manner of appointment and the way they 
operate.  There are those who are appointed because of their close relationship with the chief 
executive of the bank and therefore may not be in a position to challenge his decisions.  
Similarly, there are many directors who do not discharge the functions of their office 
satisfactorily because they do not have enough time to devote to the operations of the bank.  This 
situation could arise as a result of several factors.  One is that they may be holding directorships 
in several organisations thereby limiting their effectiveness in any one of them.  Another reason 
may be that information may be passed to the directors so close to the meeting date that they do 
not have the time to read and digest the information contained in the papers.  Some of the 
directors are appointed because of the amount of shareholding they have in the company.  In 
such a case, they may lack the expertise necessary to contribute meaningfully to the decisions of 
the board. 
 
As a safeguard, the selection and appointment committees of the board are expected to exercise 
due diligence in the appointment of members so that those appointed can contribute maximally 
to the work of the bank.  Moreover, in some countries including Ghana the selection of board 
members is subject to the approval of the regulatory authorities.  In other words, the list of 
proposed board members is sent to the regulatory authorities and prior approval must be obtained 
43 
 
University of Ghana  http://ugspace.ug.edu.gh
before they can start to function.  This is to ensure that the persons so appointed are proper and 
fit persons to occupy the lofty position of a bank director. 
 
One of the factors hindering the effectiveness of boards is the availability of information.  
Therefore management information systems (MIS) should be established in such a way that it 
provides management with the information necessary for the effective management of the bank.  
MIS are used for monitoring different types of banking activities including risk management.  
The Board of Directors should formulate risk management policies and procedures that include 
mechanisms for identifying, measuring, controlling and monitoring risks.  All information 
necessary for a director to make an informed decision should be distributed to directors in 
advance of the meeting to allow sufficient time for directors to consider the information.  In form 
and substance, such information should be relevant, concise but complete, well organized, and 
supported by any relevant background data. 
 
2.5 Loan management and performance 
 
2.5.1 What is a bank loan (credit)? 
 
Credit in general is the trust which allows one party to provide resources to another party where 
that second party does not reimburse the first party immediately (thereby generating a debt), but 
instead arranges either to repay or return those resources (or other material of equal value) at a 
later date (Sullivan et al., 2003). The resources provided may either be financial (e.g. granting of 
loans), or they may consist of goods or services (e.g. consumer credit). Therefore credit 
44 
 
University of Ghana  http://ugspace.ug.edu.gh
encompasses any form of deferred payment which is extended by a creditor, also known as the 
lender, to a debtor also known as a borrower. In this study, the credit will cover bank loans. 
Credit is advanced to beneficiaries who promise to pay on a future date. Individuals, enterprises 
and other corporate entities have different reasons for accessing credit. 
Therefore the purpose and the nature of credit have been categorised into short term, medium 
term and long term loans (Tetteh, 2012). In banking, short term loans are advances extended with 
a repayment period of within one (1) year to three (3) years. Medium term loans have a 
repayment period that falls between more than three (3) years up to five (5) years. Long term 
loans have a repayment period of more than five (5) years. In Ghana most of the banks' credits 
accessed fall within the short term. 
 
Advancing credit is key to a bank’s operations, weighing significantly within the asset balance 
file. It has the potential of generating huge profit, but equally high risk. Practice shows that credit 
risks are the highest registered in time by banks, in connection with losses. 
Credit risk is an investor’s risk of loss arising from a borrower who does not make payment as 
promised (Bluhn et al., 2002) 
 
2.5.2 Sources of credit risk 
 
Tetteh (2012) identifies some of the sources of credit risks attached to bank loans in Ghana. 
 These sources explain why bank loans are not paid when given to borrowers: 
 
45 
 
University of Ghana  http://ugspace.ug.edu.gh
 Economic conditions  
Changes in the national economy in areas of unemployment, business cycles, exchange rates, 
availability and quality of credit, and interest rates can affect bank loans. A liquidity crunch or 
economic problems has the ability to impact borrowers’ ability to fulfil their obligation. In 
addition a legal and regulatory change could cause financial institutions to change how they 
oversee a transaction, as well as the quality and ability of debt collection. 
 Competition 
Competition among financial institutions in terms of growth, profitability and the desire to be a 
market leader have the ability to cause financial institutions to lower their standards or 
improperly price their loan products. This could result in higher cost of increasing non- 
performing loans. 
 Underwriting standards 
Lenient credit underwriting can incur losses to financial institutions especially when debt 
repayment cannot be demanded or a collateral cannot be seized in time. Many credit risks arise 
from deficiency in underwriting standards and credit monitoring. 
 Competence of staff  
Credit officers without the necessary expertise in the activities they are responsible for, be it 
credits, investment, management of problem assets or new products, can lead to poor lending 
practice, ineffective administration, and eventually, loss to financial institutions. 
46 
 
University of Ghana  http://ugspace.ug.edu.gh
This may result from technical incompetence which is evident when management cannot obtain 
and assess credit information in order to analyse the viability of credit products. Such 
management weakness can eventually lead to loan losses. 
 
 Management Information System (MIS)  
Risk will increase if management does not regularly receive accurate and timely reports on 
credits. The reports shall comprise important information relating to the underwriting process 
such as economic trends, change in the structure of the industry, or market share, commodity 
prices, exchange rates, including past due credits, credit concentrations, and the analysis of 
problem loans. 
 Inappropriate assessment of credit quality  
This problem may result from competitive pressure and credit growth as they tend to put a time 
constraint on getting accurate data. Moreover, rapid growth and/or entry into new markets can 
tempt the management to lend without sufficient financial and economic analysis. 
 Introduction of new products or services without proper risk assessment  
Financial institutions that fail to thoroughly assess risk in the introduction of new products and 
do not install a risk management system prior to the launch of new products represent another 
important problem. With rapid credit growth and heightened competition, financial institutions 
are pressured to introduce new products and services to the market without proper testing. 
 
47 
 
University of Ghana  http://ugspace.ug.edu.gh
 Subjective decision making  
Subjective decision making by management happens especially when the borrower appears to 
have met the credit approval criteria. However, subjective underwriting without proper 
consideration on supporting data can lead to credit risk. 
 Lack of Proper Supervision  
Part of credit risks arise when financial institutions’ boards or management cannot oversee 
various units to ensure that they appropriately comply with the policy. 
 
2.6 Loan loss provision (LLP) 
 
It is an expense that is reserved for defaulted loans or credits.  It is an amount set aside in the 
event that the loan defaults. 
In general, banks conduct their business by taking deposits and making loans using those 
deposits.  It is a bit more complicated. However, this is the basic banking model.  Banks must 
balance their loan receivables that is the principal and interest repayments from borrowers, with 
the demand for deposits (i.e. the requests from depositors for all or a portion of their 
deposits.)  In any group of loans, banks expect there to be some loans that do not perform as 
expected.  These loans may be delinquent on their repayments or in default of the loan entirely, 
creating a loss for the bank on expected income.   
48 
 
University of Ghana  http://ugspace.ug.edu.gh
Therefore, banks set aside a portion of the expected loan repayments from all loans in its 
portfolio to cover all, or a portion, of the loss. In the event of a loss, instead of taking a loss in 
its cash flows, the bank can use the amount set aside to cover the loss.   Since the bank does not 
expect all loans to be late, there is usually enough in the loan loss reserve to cover the full loss 
for any one defaulter or a small number of loans when needed.  The loan loss reserve acts as an 
internal insurance fund. To establish the loan loss provision amounts, bank regulators require 
regular screening of bank loan portfolios, ranking each asset (i.e. loan) or group of assets 
by market conditions, collateral condition, and other business risk factors.   According to the 
Bank of Ghana (2009), the amount set aside for loan losses is about 2.5% of the outstanding loan 
receivables each year, depending on the quality of the loans in the portfolio. 
From the statement of the financial position perspective, a loss on a loan is still a loss of 
an asset.  However, on an operating basis, because of the loan loss provision, the cash 
flow remains available.  The loan loss provision ensures that banks have sufficient funds to 
provide services to its depositors. 
Table 2. 1: Category of loan, days and loss provision 
Category of Loan DAYS Provision 
A 30-90 1% 
B 90-180 10% 
C 180 < 360 25% 
D =360 50% 
E >360 100% 
Source: Bank of Ghana (2014) 
49 
 
University of Ghana  http://ugspace.ug.edu.gh
2.7 Regulatory framework and corporate governance practices 
 
Public oversight is concerned with ensuring that the confidence of investors and the general 
public is maintained. This can be achieved by direct regulation, the imposition of licensing 
requirements (including, where appropriate, exercising powers of enforcement) or by self-
regulation. As the US operates a rule-based system of governance, these responsibilities are 
discharged by a national board approved to do such, which has the power to enforce mandatory 
standards and rules laid down by the Sarbanes-Oxley Act. In the UK and most commonwealth 
countries, regulation is required for corporate governance (ACCA, 2013). 
 
Being a former British colony, Ghana inherited the English common law system from their 
colonial masters, Britain (Sarbah, 2014). The Ghanaian corporate governance system follows the 
Anglo-American model. The company law that regulates the activities of corporate bodies is 
based on this model of corporate governance. The Ghanaian regulatory framework with regard to 
corporate governance comprises the Ghana Companies Code 1963 (Act 179), the Securities 
Industry Law, 1993 (PNDCL 333) and the Securities Industry (Amendment) Act, 2000 (Act 
590), and the Membership and Listing Regulations of the Ghana Stock Exchange (GSE, 1990). It 
is supported by the Ghana National Accounting Standards and the codes of professional conduct 
imposed by the Institute of Chartered Accountants (Ghana) on its members. 
 
The Companies Code, 1963 (Act 179) provides the framework to a company with regards to its 
membership, its independence and the expertise of its directors.  It also provides, under section 
180(1) of the code that every company must have at least two directors with the maximum to be 
50 
 
University of Ghana  http://ugspace.ug.edu.gh
fixed by the shareholders at an annual general meeting of the company under the provisions of 
section 181. Directors have a fiduciary role and the code provides sanctions under section 185 in 
the event of breaches.  
 
Similarly, the Securities Industry Law,1993 (PNDCL, 333) gives the Securities and Exchange 
Commission regulatory authority over institutions and persons operating in the industry such as 
stock exchanges, investment advisers and  securities dealers. The primary goal of the Securities 
Exchange Commission, Ghana is to protect investors and maintain the integrity of the securities 
market. The Commission is an active regulator that has been unafraid to suspend market 
participants that disobey. Also, the Ghana Stock Exchange (GSE) regulates listed entities 
registered under the Ghana Stock Exchange (GSE) and enforces conformity to the Listing 
Regulations (1990). Listed companies are required to comply with the corporate governance 
guideline for best practices by the Securities and Exchange Commission, Ghana and the Listing 
Regulations.  
 
Most of the firms listed on the GSE are predominantly foreign and multinationals and operate 
under mandatory regulations.  In view of this, most companies tend to be compliant with its 
requirements under the international corporate governance principles of best practices (ROSC, 
2005). The GSE listing regulations provide the timeframe within which annual reports should be 
circulated and also require investors to be provided with information such as members of the 
board and key executives and their remuneration, material foreseeable risk factors, major share 
ownership and voting rights, and the financial and operating results of the company. The 
51 
 
University of Ghana  http://ugspace.ug.edu.gh
Company’s Code requires the disclosure by directors of material interests in transactions or 
contracts affecting the company. In addition, the code is supported by the GSE listing 
regulations, requires, among others, that listed companies establish and maintain audit 
committees, and it provides for the appointment, retirement and removal of directors as well as 
their qualifications. When it comes to the financial reporting by banks and non-bank financial 
services, listed companies are regulated by the Bank of Ghana under the accounting and auditing 
requirements set by the Banking Act 2004, (Act 673) as amended by the Banking (Amendment) 
Act 2007, (Act 738).  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER THREE 
METHODOLOGY 
3.1 Introduction 
This chapter sets out the procedure and tools which were used in collecting data for the research 
project. The methodology was designed to enable the researcher achieve the objectives of the 
study which were set out in Chapter One. It captures the following sub-headings: study design, 
population, sample and sampling procedures, instruments, data collection and data analysis 
procedures.  
 
3.2 Research Design 
The research design adopted for this study is descriptive and explanatory designs with a 
quantitative research approach. According to Cooper & Schindler (2013), a research design 
broadly consists of various elements like the type of research approach, the sampling technique 
and size, data collection instruments, and the data analysis method. Thus, the research design is 
considered as the framework created to seek answers to the research questions in chapter one. 
Explanatory and descriptive research designs are adopted for this study with the aim of 
explaining into details the relationship between corporate governance practices of banks and loan 
administration. This study also adopted a quantitative research approach because the data for this 
study is secondary data of annual financial reports sampled banks used in this study. 
 
 
  
53 
 
University of Ghana  http://ugspace.ug.edu.gh
3.3 Population and sample size 
i) Population 
The population of the study consists of all twenty-seven (27) deposit money banks licensed by 
the Bank of Ghana to undertake banking services (Bank of Ghana, 2013). 
ii) Sample size 
Out of the 27 existing commercial banks as at 2013, twenty (20) are selected as a sample size. 
These 20 represent 74% of the 27 banks which is a fair representative for good analysis (Cooper 
& Schindler, 2013). The following reasons support why 20 banks were selected for this study: 
The banking industry is largely dominated by the four biggest banks, namely Ghana Commercial 
Bank (GCB), Standard Chartered Bank (SCB), Barclays Bank (BBG) and Ecobank (EBG). 
These banks are automatically selected because these four banks command a total market share 
(total deposits) of about 53% as at 2006, this declined to 39% as at 2013. GCB is the only 
Ghanaian bank among these topmost four banks, the other three are foreign banks. In order to get 
a fair share of the other banks, the researcher decided to include 16 more banks with a blend of 
local and foreign banks. Banks with loan loss provision above 9% of the industry average as at 
2013 are automatically selected and added to the four topmost banks. Banks with loan loss 
provision above 9% are believed to be suffering from poor corporate governance practices with 
respect to loan administration. The rest were selected based on the number of years of existence 
in the banking industry. In summary the twenty (20) were selected based on: 
i) Their size in terms of market share (deposits). 
ii) Their loan loss provisions (non-performing loans) above industry average of 9% and 
iii) Number of years of existence 
54 
 
University of Ghana  http://ugspace.ug.edu.gh
 
 
 Loan Loss Provision - December 2013 Returns
31%
 
 
20% 19%
18% 18%
 15%
13%
Instru1m0%ent(s) 10% 9% 9%
8% 8% 7% 7% 8%
 5% 5% 6%
4% 4%
3% 3%
 1% 1% 1% 1%
 
 
 
Figure 3. 1: Loan loss provision for December 2013 
55 
 
University of Ghana  http://ugspace.ug.edu.gh
Deposits
EBG GCB SCB SBL BBG FIDELITY ZIB ADB SG-SSB
UNI UT BANK CAL NIB Access GT BANK PBL UBA HFC
MBG BoA FAMBL ICB ROYAL Sahel Energy Baroda
1% 1% 1% 0%
2% 1%
0%
2%
3% 14%
3%
3%
3%
3% 11%
3%
4%
7%
4%
4%
7%
4%
4% 7%
5% 5%
 
Figure 3. 2: Market Share of deposits of all banks in Ghana as at 31st December, 2013 
Source: Field Survey (2014) 
**Merchant Bank (MBG) is now Universal Merchant Bank (UMB) 
 
56 
 
University of Ghana  http://ugspace.ug.edu.gh
 
No. of Years of Existence
117
96
60
48 50
38
23 23 23 23
16 17 16
12
7 9 96 6 84 5 4 4
0 2 2 1 1
No. of Years of Existence
 
Figure 3. 3: Number of years of existences of all banks in Ghana as at 31st December, 2013 
Source: Bank of Ghana (2014) 
Based on the three key-points above , the following banks were selected for the analysis: Ghana 
Commercial Bank (GCB), Barclays Bank Ghana (BBG), Standard Chartered Bank (SCB), 
EcoBank Ghana (EBG), National Investment Bank (NIB), Societe General (SG-SSB), 
57 
 
University of Ghana  http://ugspace.ug.edu.gh
Agricultural Development Bank (ADB), Guarantee Trust Bank (GTB), Stanbic Bank (SBL), 
Unique Trust Bank (UTB), Universal Merchant Bank (UMB), Zenith Bank (ZIB), Cal Bank 
(CAL), Bank of Africa (BOA), International Commercial Bank (ICB), First Atlantic Merchant 
Bank (FAMBL), Sahel-Sahara Bank (Sahel), UniBank (UNI), Home Finance Company Bank 
(HFC), and Prudential Bank (PBL). 
 
3.4 Source of data 
Quantitative data on loan loss provisions is used for the study and it was entirely secondary. It 
was obtained from the Bank of Ghana. The study uses data from 2006 to 2013 on the 20 banks 
(both foreign and domestic banks).  
 
3.5 Data analysis 
 
3.5.1     Specification of empirical model 
The study utilizes a multiple regression analysis with special emphasis on a dummy variable 
regression to establish whether corporate governance variables or components explain the 
variation in non-performing loans through loan loss provisions. The quality of corporate 
governance is estimated as a function of the banks’ corporate governance elements, which have 
been defined in the study as BD, CC, LU, RM, CRM, CM, CAL, LT, AC, and BG. The model is 
consistent with Ibrahim (2009), with little modification. The general form of the model is:  
NPL = f (CG), Hence  
NPL = f (BD, CC, LU, RM, CRM, CM, CAL, LT, AC, BG)  
58 
 
University of Ghana  http://ugspace.ug.edu.gh
Using the ordinary least square (OLS) structure, the function could be expressed as:  
𝑁𝑃𝐿 =  𝛽0 + 𝛽1𝐵𝐷𝑖  + 𝛽2𝐶𝐶𝑖 + 𝛽3𝐿𝑈𝑖 + 𝛽4𝑅𝑀𝑖 + 𝛽5𝐶𝑅𝑀𝑖 + 𝛽6𝐶𝑀𝑖 + 𝛽7𝐶𝐴𝐿𝑖 + 𝛽8𝐿𝑇𝑖   
+ 𝛽9𝐴𝐶𝑖 + 𝛽10𝐵𝐺𝑖 + 𝜇𝑖 
Where:  
 CG = Corporate governance  
NPL = Non-performing loans 
BD = Board of Directors 
CC = Credit Committee  
LU = Lending Units 
RM = Relationship Management 
CRM = Credit Risk Management 
CM = Credit Monitoring 
CAL = Credit Approval Limits 
LT = Legal Team 
AC = Audit Committee 
BG = Bank of Ghana 
 𝛽0 = Constant 
 𝛽1, 𝛽2, 𝛽3, 𝛽4, 𝛽5, 𝛽6, 𝛽7, 𝛽8, 𝛽9, 𝛽10 = Linear regression co-efficient  
𝜇𝑖 = Error terms assumed to satisfy the standard ordinary least square. 
Significance level is set at 95% confidence level. This gives room for an error of 5%, which is 
known as the alpha (α) of 0.05 which is 5%. 
 
59 
 
University of Ghana  http://ugspace.ug.edu.gh
3.5.2   Description of variables and measurement 
 
 3.5.2.1 Dependent variable 
 
Non-performing loans (NPL): it looks at the quality of the loans given and how they are 
performing through the loan loss provisions of the bank as reported in the banks’ annual reports. 
This serves as a measure of the performance of loans in all the banks. 
 
3.5.2.2 Independent variables 
 
Board of Directors (BD) is made up of the number of directors in the bank board. 
Credit Committee (CC): The proportion of executive directors (executive Managers) on the 
board, and is calculated as the number of executive directors divided by the total number of 
directors. 
Relationship Management (RM): The number of relationship managers in the banks in 
proportion to total employees. 
Credit Risk Management (CRM): A dichotomous variable of credit analysis, allocation and 
credit control variable, assigned 1 if it is effective, and 0 if is not effective. 
Credit Monitoring (CM): A binary variable of credit monitoring variable, assigned 1 if it is 
effective, and 0 if is not effective. 
Credit Approval Limit (CAL): Rank of Credit Approval limit from 1 to 10 
Legal Team (LT): A binary variable of the effectiveness of the legal team on loan 
administration; effective 1 and ineffective 0. 
60 
 
University of Ghana  http://ugspace.ug.edu.gh
Composition of Audit Committee (AC): A dichotomous variable, assigned 1 if there are at 
least three non–executive directors on the audit committee, otherwise 0.  
Bank of Ghana Control Measures (BG): A binary variable of Bank of Ghana measures, 
assigned 1 if it is effective, and 0 if is not effective. 
 
3.6 Trend analysis 
Trend analysis of individual bank from 2006 to 2013 captures loan loss provisions, deposits and 
loans to deposit ratio for all the twenty banks selected. 
 
3.7 Research limitations 
The research covers sample banks in the only in Ghana due to time and cost of information in 
undertaking the research. Also, the research focuses exclusively on commercial banks in Ghana 
to the detriment of other financial institutions. Other financial institutions such as savings and 
loans limited, credit unions, rural banks and cooperative societies who are also into loan 
administrations are not considered in this study. Again, the sample size is relatively small in 
relation to typical market-based analysis. A typical market-based research should contain at least 
one hundred (100) or more and the number of years of study should be more than 20 years 
(Mensah, 2014). But this research focuses on only 20 banks out of the 27 commercial banks in 
Ghana. Finally, dependence on loan performance without due regard to other relevant 
information from the banks may not aid the researcher to make much meaningful analysis. The 
core assets of the banks are loans and advances and the liabilities are the deposits. 
61 
 
University of Ghana  http://ugspace.ug.edu.gh
3.8     Concluding remarks 
The chapter has dealt with the issue of population and sample, model specification, variable 
description, measurement, justification for the choice of variables as well as a measure of 
economic expectation, particularly in terms of signs and measurement. A trend analysis of the 
loan loss provision which reflects the performance of loans in the banks. By this, the chapter has 
set out a good platform for the estimations and the discussion of results in chapter four. 
 
 
 
 
 
 
 
 
 
 
 
 
62 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER FOUR 
DATA ANALYSIS AND DISCUSSION OF RESULTS 
4.1 Introduction 
 
This chapter deals with the analysis and discussion of data showing the kind of relationship that 
exists between the variables and concepts discussed in the previous chapters. The analysis was 
carried out in the arrangement of the secondary data obtained. This chapter is structured as 
follows: A trend analysis of loan loss of individual banks with issues such as the history of the 
banks, their internal capacity, market share, services, and loan advances; and a multivariate data 
analysis of the relationship between the performance of loans using loan loss, and corporate 
governance elements with Ordinary Least Squares (OLS) regression and correlation. 
 
4.2 The trend of loan loss provision of sampled banks 
The main purpose of this section is to look at the trend of the loan loss provision of the sampled 
banks in Ghana. But, the section starts with the history, ownership, internal capacity, market 
share, services rendered and the amount of loans given out by the sampled banks. These other 
sub-topics are to highlight the activities of each of the sampled bank based on the data gathered. 
The analysis of the trend in the loan loss provision is in connection with internal and external 
factors of the sampled banks from 2006 to 2013.  
 
 
63 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.1 GCB (Ghana Commercial Bank)  
 
 Brief Background 
Ghana Commercial Bank Ltd, Ghana’s foremost bank was established in 1953 as the Bank of the 
Gold Coast (Annual Financial Report, 2013).  
 Competitive Edge 
The competitive edge enjoyed by the bank includes the number of years of existence in the 
banking industry, its market share (total deposits) helping the bank to enjoy a large market share 
of deposits over the years except 2012 when Ecobank took over as the leading bank with 12.8% 
after Ecobank’s merger with The Trust Bank (TTB), and also the support GCB enjoys from the 
government which other banks do not have. 
 Why GCB was selected 
GCB was selected for this analysis because of its position as one of the topmost four (4) banks in 
the industry for the past fifty (50) years. The loan loss provision of 31% above industry average 
of 9% as at 2013 was considered and then, the bank has been in the banking industry for about 
sixty (60) years 
 Position in the Industry 
As at 2013, GCB is the second largest bank in the industry in-terms of total assets. The bank 
possesses 9.3% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the second most profitable bank in the industry with 13.6% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
64 
 
University of Ghana  http://ugspace.ug.edu.gh
 Market share 
GCB had 639.18 million Ghana Cedis total deposits in the banking industry in 2006 but the 
amount increased to 2,635.52 million Ghana Cedis in 2013. The line graph below shows the 
trend of market share of the bank in terms of total deposits from 2006 to 2013. 
Deposits in Millions of Ghana Cedis
2635.52
2338.06
2055.22
1579.69
1262.16
1047.33
844.43
639.18
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Figure 4. 1: The trend of deposits at GCB 
Source: Bank of Ghana Data (2014) 
From the trend GCB total deposits increased from 639.18 million Ghana Cedis in 2006 to 
2,635.52 million Ghana Cedis, representing 312.33% over the eight-year (8) period of analysis. 
This is impressive looking at the customer base and the assets being managed by the bank. 
 
 
65 
 
University of Ghana  http://ugspace.ug.edu.gh
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances, less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued, and also because of the prudence concept. The loan to deposit ratio offers to show the 
loans issued which is going out of the bank and the total deposits coming into the bank. 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of GCB 
from 2006 to 2013.  
Loan Loss Provision Loan to Deposit ratio
104.99 
103.01 
86.13 
60.77 
35.69 35.01 
57.36 21.05 
39.26
28.83 31
19.57
2.3 2.86 2.8 5.36
2006 2007 2008 2009 2010 2011 2012 2013
.  
Figure 4. 2: Loan loss provision and loan to deposit ratio of GCB 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 2.3% in 2006 to 39.26% in 2011 but declined in 
2012 to 28.83%. In 2013 it increased again to 31% far above the industry average of 9%. 
66 
 
University of Ghana  http://ugspace.ug.edu.gh
While the loan loss provision was increasing, loan to deposit ratios were also increasing. It 
declined after 2010 and it has enjoyed almost a constant increase in 2012 and 2013.  
 
2006 2007 2008  
2009
2% 2% 2%
4%
2013  
23% 2010
15%
 
 
2012
22%
2011  
30%
 
 
 
Figure 4. 3: GCB Loan Loss Percentages 
Source: Bank of Ghana Data (2014) 
The bar chart above shows the bank did well in managing its loans in 2006, 2007, 2008 and 2009 
because they contributed only 10% of the entire loss of net assets of the bank in these four years. 
2011 gave the highest loan loss percentage of 30% because this year was in the aftermath of the 
global financial crunch which ended in 2010. The global economic crunch affected many 
customers of the bank financially so they were not able to repay or honour their loan covenants 
 
67 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.2 Barclays Bank Ghana (BBG) 
 
 Brief Background 
The Barclays bank of Ghana is a subsidiary of Barclays Bank PLC with the global headquarters 
in London, United Kingdom. It started operations in Ghana around the year 1917 (Barclays 
Bank, 2014). 
 Competitive Edge  
The competitive advantage the bank has in the banking industry is the number of years it has 
been in the banking industry, its market share (total deposits) and the support the bank gets from 
the parent company. The bank is also able to get a huge financial bailout from their parent 
company in times of economic downturns.  The bank is also able to get and introduce new and 
competitive products from their co-subsidiaries in other countries 
 Why Barclays Bank was selected 
Barclays Bank was selected for this analysis because of its position as one of the topmost four 
(4) banks in the industry for the past ninety (90) years.  
 Position in the Industry 
As at 2013, Barclays Bank enjoyed the position of the fifth largest bank in the industry in-terms 
of total assets. That is, the bank possesses 6.5% of the total assets of the industry (Bank of 
Ghana, 2014). The bank is ranked as the fourth most profitable bank in the industry with 9.8% of 
the profit before tax as at 2013 (Bank of Ghana, 2014). 
 
68 
 
University of Ghana  http://ugspace.ug.edu.gh
 Market share 
Barclays Bank’s total deposits in the banking industry in 2006 were 450.18 million Ghana Cedis, 
out of the total banking industry deposits 3,440.03 million Ghana Cedis and this figure increased 
to 1,598 million Ghana Cedis (Bank of Ghana, 2013). Barclays bank Ghana did not ever claim a 
first position in terms of total deposits under the 8-year period of analysis. 
The scatter graph below shows the trend of market share of the bank in terms of total deposits 
from 2006 to 2013. 
Figure 4. 4: The trend of deposits at BBG 
1800
1600
1400
1200
1000
800
600
400
200
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend BBG’s total deposits rose from 2006 to 2008, and continued to rise becoming 
sharper from 2011 to 2013. 
 
 
69 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 5: Gross loan per Net assets Ratios of BBG 
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013
Loans/Net Assets (%) 56.3 53.7 53.1 45.12 36.84 34.5 36.6 42.2
 
In 2006, the gross loans per net assets of Barclays Bank was 56.3% of the total assets, this means 
that more than half of the total assets or resources of the bank was given out as loans and 
advances to customers, banks and institutions. Even though it is good for the long-term 
investment, this dents the current survival and growth of the bank. This 56.3% may also be as a 
result of poor corporate governance practices of the bank which affected the bank negatively in 
issuing loans to customers. In 2007, the figure dipped down by 3% which was not so significant 
looking at the loans the bank gave out in 2006. At this figure, it can be said that the bank realised 
the negative effects of the huge loans they were giving out and they attempted to beat it down. It 
came down in 2008 and further down in 2009 of 45.12%. Through effective corporate 
governance processes the bank started to embark on a loan collection strategy, and issued fewer 
loans compared to 2006 and 2007. 
 
Gross loan to net assets in 2011 was 34% but the figure showing how efficient the bank became 
in reducing the huge loan loss that they were experiencing will be explained later in the loan loss 
of the bank. The loans and advances figure started going up because the bank stopped its 
70 
 
Percetages
University of Ghana  http://ugspace.ug.edu.gh
expansionary policy of opening and expanding existing ones. And as at 2013, 42% was recorded 
attesting to the extent of capture and increase its customer base based on the loans they were 
giving out. 
 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued, and also because of the prudence concept.  
 
The loan to deposit ratio offers to show the loans issued which are going out of the bank and the 
total deposits coming into the bank. 
The line graph below shows the trend in loan to deposit ratio and the loan loss provision of 
Barclays Bank from 2006 to 2013.  
 
 
 
 
 
 
71 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 6: Loan loss provision and loan to deposit ratio of BBG 
Loan Loss Provision Loan to Deposit ratio
44.73 
185.02
148.06 
49.65 
95.7
81.33 77.69 
47.55 
35.41 57.16 
26.4 28.86
4.1 4.4 7.9 8
2006 2007 2008 2009 2010 2011 2012 2013
.  
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 4.1% in 2006 to 28.86% in 2010. It rose up 
sharply to 185.02% in 2011 and declined to 8% in 2013. At the same time, the loan loss 
provisions were increasing. They declined after 2010 and have enjoyed almost a constant 
decrease in 2012 and 2013.  
 
4.2.3 Standard Charteered Bank (SCB) 
 Brief Background 
The Standard Chartered Bank is the oldest bank in the Ghanaian banking industry established in 
1896. The bank is wholly a subsidiary of Standard Chartered Bank Worldwide.  
72 
 
University of Ghana  http://ugspace.ug.edu.gh
 Competitive Edge 
The competitive edge enjoyed by the bank over its competitors stems from the number of years 
of experience the bank has. Also, the bank receives support, both technical and financial from its 
parent company. This helps the bank to do well overall. 
 Why SCB was selected 
SCB was selected for this analysis because of its position as one of the topmost banks in the 
industry for the past hundred (100) years. The bank has the longest and best kept records on all 
banking transactions in Ghana. 
 Position in the Industry 
As at 2013, SCB was the third largest bank in the industry in-terms of total assets. The bank 
possessed 8.2% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the third most profitable bank in the industry with 12.7% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
Standard Chartered Bank was ranked third in the Ghanaian banking industry for loans and 
advances made at the end of 2013. This shows that the bank recorded 6.16% of the total share of 
loans that were given out in the whole banking industry. The figure below shows the gross loan 
per total asset of the bank from 2006 to 2013. 
 
 
 
 
73 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 7: Gross loan per Net assets Ratios of SCB 
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013
Loans/Net Assets (%) 57.2 48.5 52.4 49.7 54.3 42.5 39.3 32.3
 
Source: Bank of Ghana Data (2014) 
In 2006, the gross loans per net assets of the bank was 57.2% of the total assets, this means that 
more than half of the total assets or resources of the bank was given out as loans and advances to 
customers, banks and institutions. Even though it is good for the long-term investment, this dents 
the current survival and growth of the bank. The world economic crisis affected the bank 
negatively. Through effective corporate governance practices the bank started embarking on a 
loan collection strategy, and issued fewer loans in 2011, 2012 and 2013. 
 Market share 
SCB had a total deposit increased from 445.54 million Ghana Cedis to 1,779.13 million Ghana 
Cedis in 2013 (Bank of Ghana, 2014). This represents 7.5% of the total deposit in the industry.  
74 
 
Percetages
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total net deposits 
from 2006 to 2013. 
Figure 4. 8: The trend of deposits at SCB  
1704.18 1779.13
1502.43
1092.71
745.61 843.97
445.54 534.84
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend, SCB’s total deposits soared from 445.54 million Ghana Cedis in 2006 to 
1,779.13 million Ghana Cedis representing 299.3% over the eight (8) year period of analysis. 
This is impressive looking at the customer base, the number of years the bank has been in 
existence and the total deposits of the bank. 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances, less the security (collateral) taken from borrowers. The 
75 
 
University of Ghana  http://ugspace.ug.edu.gh
provisions are made because it is required by the central bank to make provisions on all loans 
issued (out), and also because of the prudence concept.  
 
The loan to deposit ratio offers to show the loans issued which are going out of the bank and the 
total deposits coming into the bank. 
 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of SCB 
from 2006 to 2013.  
Figure 4. 9: Loan loss provision and loan to deposit ratio of SCB 
80
70 61.68 
49.84 55.49 
60 53.69 53.56 
41.06 
50 42.27 39.21 
Loan to Deposit ratio
40
Loan Loss Provision
30
20
16.2
10 11.92
6.6 8.13 8.92 8.94
10
5.23
0
2006 2007 2008 2009 2010 2011 2012 2013
.  
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 5.23% in 2006 to 16.2% in 2009, but declined to 
10% in 2013 at 28.83%.  
76 
 
University of Ghana  http://ugspace.ug.edu.gh
While the loan loss provision was increasing, loan to deposit ratios were also fluctuating and the 
figures involved are huge. 
 
4.2.4 Ecobank Ghana (EBG) 
 Brief Background 
Ecobank Ghana (EBG) is 100% subsidiary of the Ecobank Group with its headquarters in Lome, 
Togo. It is considered as a Pan-Africa bank. It was established in Ghana in 1990.  
 Competitive Edge 
The competitive edge the bank enjoys comes from its position among the topmost banks in 
Ghana. From 2012 to 2013, the bank has positioned itself at the top of the banking industry. The 
bank has been able to get this position due to its numerous merger moves on its competitors. The 
quality services delivered by the bank and its fame as a Pan-African Bank have really helped the 
bank.  
 Why EBG was selected 
EBG was selected for this analysis because of its position as one of the topmost banks in the 
industry.  
 Position in the Industry 
As at 2013, EBG was the largest bank in the industry in-terms of total assets. The bank possesses 
12.9% of the total assets of the industry (Bank of Ghana, 2014).  
77 
 
University of Ghana  http://ugspace.ug.edu.gh
The bank is ranked as the most profitable bank in the industry with 14.8% of the profit before tax 
as at 2013 (Bank of Ghana, 2014). 
 Market share 
The market share of Ecobank and its position in the banking industry has been fluctuating from 
2006. In 2006, it was the fourth biggest bank with a market share of 8.8%, but this position 
changed in 2012, when the bank became the bank with the highest market share of 12.8%. The 
figure increased to 13.9% in 2013.  
 
The column graph below shows the trend of market share of the bank in terms of total deposits 
from 2006 to 2013. 
Figure 4. 10: The trend of deposits at EBG 
3304.88
2530.45
1624.31
304.14 407.8 634.57 899.48
1123.06
2006 2007 2008 2009 2010 2011
2012
2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
78 
 
University of Ghana  http://ugspace.ug.edu.gh
From the trend EBG’s total deposits increased over the eight (8) year period of analysis. The 
increase is rapid due to good loan management, mergers and an increase in the capital base from 
the bank’s parent company. 
 
Currently EBG holds the first position in terms of loans and advances given to customers in the 
banking industry. This shows that the bank recorded 16. 22% of the total share of loans that were 
given out in the whole banking industry. The figure below shows the gross loan per total asset of 
the bank from 2006 to 2013. 
Figure 4. 11: Gross loan per Net assets Ratios of EBG 
70
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013
Loans/Net Assets (%) 45.3 43.7 47.4 49.32 56.84 54.5 56.9 58.2
 
Source: Bank of Ghana Data (2014) 
From 2006 to 2010, the bank recorded an increase in the loans they were giving out with respect 
to the total assets they have. This is due to the increasing acceptance of the bank in the Ghanaian 
minds and its drive to improve businesses in Ghana. 
79 
 
Percetages
University of Ghana  http://ugspace.ug.edu.gh
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances, less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of the prudence concept.  The loan to deposit ratio offers to show 
the loans issued which is going out of the bank and the total deposits coming into the bank. The 
line graph below shows the trend in loan to deposit ratio and loan loss provision of EBG from 
2006 to 2013.  
Figure 4. 12: Loan loss provision and loan to deposit ratio of EBG 
Loan Loss Provision Loan to Deposit ratio
70.19 
62.75 64.13 
53.39 54.02 
50.08 51.46 
43.70 
7.4 6.7 3.33 4.41 4.96 2.6 5.91 5
2006 2007 2008 2009 2010 2011 2012 2013
.  
Source: Bank of Ghana Data (2014) 
From the diagram, EBG enjoyed the lowest figures in their loan loss provision in the industry. 
From the diagram, it decreased from 7.4% in 2006 to 5% in 2013. This is an impressive 
performance. While the loan loss provision was increasing, the loan to deposit ratios were also 
80 
 
University of Ghana  http://ugspace.ug.edu.gh
increasing.  Both declined after 2010 and have enjoyed almost a constant increase from 2010 to 
2013.  
 
4.2.5 National Investmant Bank (NIB) 
 Brief Background 
The National Investment Bank is a wholly owned public company established in 1967. It was 
established by the government to support local investors to expand the business avenues of 
Ghana.  
 Competitive Edge 
The bank until recently was the bank that was mandated to support local business to growth. This 
made the bank attract local investors and businesses as its customers. 
 Why NIB was selected 
NIB was selected for this analysis because of the bank's many years of existence. The bank has 
been in the industry for fifty (50) years. The bank also has a loan loss provision of 13% above 
the industry average of 9%. This also qualified the bank to be part of the analysis.  
 Position in the Industry  
As at 2013, NIB is the thirteenth largest bank in the industry in-terms of total assets. The bank 
possesses 3.3% of the total deposits of the industry (Bank of Ghana, 2014).  
81 
 
University of Ghana  http://ugspace.ug.edu.gh
The bank is ranked as the sixteenth most profitable bank in the industry with 1.5% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
NIB was the eighth largest bank in Ghana as at 2006 in terms of total deposits. The bank lost its 
position to thirteenth in 2008 and the bank has maintained that position to 2013. 
 
The line graph below shows the trend of the market share of the bank in terms of total deposits 
from 2006 to 2013. 
Figure 4. 13: The trend of deposits at NIB 
775.85
732.55 705.59
467.69
345.98
217.08 242.95
139.94
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
NIB’s total deposits increased from 2006 to 2011, declined in 2012 and started increasing again 
in 2013. 
82 
 
University of Ghana  http://ugspace.ug.edu.gh
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions made for loans that may not be repaid, over net loans 
issued to customers. The net loans are made of the total loans and advances less the security 
(collateral) taken from borrowers. The loan to deposit ratio offers to show the loans issued which 
is going out of the bank and the total deposits coming into the bank. 
 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of NIB 
from 2006 to 2013. 
Figure 4. 14: Loan loss provision and loan to deposit ratio of NIB 
Loan Loss Provision Loan to Deposit ratio
107.80 118.18 
92.27 86.73 
63.68 
55.70 61.32 
43.44 
16.6 16.6 21.53 18.62 16.53 18.4311.17 13
2006 2007 2008 2009 2010 2011 2012 2013
.       
 
Source: Bank of Ghana Data (2014) 
The loan loss provision of NIB has experienced constant changes in figures except in 2008 and 
in 2013 that recorded lower figures. The loan to deposit ratio in percentage terms increased 
initially in 2008 but fell afterward to 2011. It started increasing again in 2012 and 2013. 
 
 
83 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.6 Societe Generale- Social Security Bank (SG-SSB) 
 Brief Background 
The bank was established in 1975. A National Redemption Council (NRC) Government Decree 
established this bank to cater for the pension needs of workers.  
 Competitive Edge 
The bank has governmental support in terms of resources to do business. The bank also has the 
support of Social Security and National Insurance Trust (SSNIT), these thus being the bank’s 
largest customer base. 
 Why SG-SSB was selected 
This bank was selected for the analysis because of the number of years it has been in existence in 
the banking industry. 
 Position in the Industry 
The position of the bank in the banking industry has been changing since 2006, because of the 
entrance of new banks. As at 2013, SG-SSB was rated as the ninth bank with a percentage of 
3.9% of the total deposits of all banks. The bank is ranked as the twelfth most profitable bank in 
the industry with 2.6% of   profit before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
SG-SSB had 6.9% of the market share in 2006. The market share decreased to 4.2% in 2008 and 
it came down to 3.9% as 2013. 
84 
 
University of Ghana  http://ugspace.ug.edu.gh
The area graph below shows the trend of the market share of the bank in terms of total deposits 
from 2006 to 2013. 
Figure 4. 15: The trend of deposits at SG-SSB 
926.13
856.46
625.77
495.4
382.92
236.77 279.93 298.86
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend of SG-SSB total deposits, they increased from 236.77 million Ghana Cedis in 
2006 to 926.13 million Ghana Cedis over the eight (8) year period of analysis. This is impressive 
looking at the limited customer base and the total deposits being managed by the bank. 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued, and also because of the prudence concept. The loan to deposit ratio offers to show the 
loans issued which are going out of the bank and the total deposits coming into the bank. 
85 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend in loan to deposit ratio and loan loss provision of SG-SSB 
from 2006 to 2013.  
Figure 4. 16:  Loan loss provision and loan to deposit ratio of SG-SSB 
Loan Loss Provision Loan to Deposit ratio
103.01 
75.89 79.85 80.32 
59.83 
55.06 60.73 
38.92 
10.8 10
5.02 8.634.89 7.62 5.01 5
2006 2007 2008 2009 2010 2011 2012 2013
.  
Source: Bank of Ghana Data (2014) 
From the diagram, the loan to deposits increased from 59.83% in 2006 to 103.01% in 2008 but 
declined to 38.92% in 2010. The figure started rising again in 2011. 
The loan loss provision has been increasing at a near constant rate.  
 
4.2.7 Agricultural Development Bank (ADB) 
 Brief Background 
Agricultural Development Bank (ADB) is a wholly owned Ghanaian bank which was established 
in 1965. 
86 
 
University of Ghana  http://ugspace.ug.edu.gh
 Competitive Edge 
The competitive edge enjoyed by the bank stems from the focus the bank has of helping farmers 
and agro-based industries. It is the main bank that provides almost all the banking products on 
agriculture. This draws a lot of customers to its fold. 
 Why ADB was selected 
ADB was selected for this analysis because it is one of the oldest banks in Ghana.  
 Position in the Industry 
As at 2013, ADB was the fifth largest bank in the industry in terms of total assets. The bank 
possesses 8.0% of the total assets of the industry in 2013 (Bank of Ghana, 2014).  
The bank is ranked as the second most profitable bank in the industry with 13.6% of the profits 
before tax as at 2013 (Bank of Ghana, 2014). 
 
As at 2010, the bank was the largest lending bank for the agricultural sector providing 35% to the 
sector. The bank provides loans to customers, both bank and non-bank institutions, including 
individuals. The bank is ranked 9th in the Ghanaian banking industry for loans and advances 
made at the end of 2013. The figure below shows the gross loan per total asset of the bank from 
2006 to 2013. 
 
 
 
 
87 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 17: Gross loan per Net assets Ratios of ADB 
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013
Loans/Net Assets (%) 46.1 43.7 52.5 55.15 48.8 54.5 39.6 34.2
 
Source: Bank of Ghana Data (2014) 
In 2006, the gross loans per net assets of ADB were 46.1%.  This is good for the long-term 
investment but this dents the current survival and growth of the bank. In 2009, 55.15% of the 
total resources of the bank were given out as loans as a result of the economic recession and 
change of government.   
 Market share 
ADB had a market share of 236.48 million Ghana cedis of the total deposits in the banking 
industry in 2006. This made the bank the sixth largest bank in 2006. But in 2013, the bank lost its 
position to eighth position.  
 
 
88 
 
Percetages
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 18: The trend of deposits at ADB 
1066.45
969.46
835.21
539.34
429.68
321.71
272.66
236.48
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend ADB’s total deposits increased from GH 236.48 million in 2006 to GH 1066.45 
million Ghana Cedis over the period of analysis. 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of ADB 
from 2006 to 2013.  
 
 
 
 
89 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 19: Loan loss provision and loan to deposit ratio of ADB 
Loan Loss Provision Loan to Deposit ratio
113.65 118.02 
106.98 
81.76 80.98 
78.14 80.67 
64.62 
17.65
13.6
9.4 12.26 8
4.07 5.03 5.99
2006 2007 2008 2009 2010 2011 2012 2013
.  
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision increased from 9.4% in 2006 to 17.65% in 2009 but 
declined in 2010 to 4.07%. In 2013 it increased again to 8% below the industry average of 9%. 
While the loan loss provision was increasing, loan to deposit ratios were rising and falling. 
 
 
 
 
 
90 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.8 Guaranty Trust Bank (GTB) 
 Brief Background 
GT Bank is a wholly Nigerian owned bank with branches in Ghana. The bank was established in 
2006. 
 Competitive Edge 
The competitive edge enjoyed by the bank includes the branding of the bank’s products and 
aggressive marketing techniques.  
 Why GT Bank was selected 
GT Bank was selected for the study because of the loan loss provision of 18% which is far above 
the industry’s average of 9%.  
 Position in the Industry 
As at 2013, GT Bank was the seventeenth largest bank in the industry in-terms of total assets. 
The bank possesses 2.6% of the total assets of the industry (Bank of Ghana, 2014). The bank is 
ranked as the ninth most profitable bank in the industry with 7.50% of the profit before tax as at 
2013 (Bank of Ghana, 2014). 
 Market share 
The market share of the GT bank as at 2013 is 3%, putting it at the fifteenth position in the 
banking industry. The bar graph below shows the trend of market share of the bank in terms of 
total deposits from 2006 to 2013.     
91 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 20: The trend of deposits at GT Bank 
708.79
518.65
286.89 310.05
179.98
12.54 32.51 91.45
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend, GT Bank’s total deposits increased from 12.54 in 2006 to 708.79 representing 
5553.64% over the eight (8) period of analysis. This is impressive and its growth is the best in 
the entire industry. 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
The line graph below shows the trend in loan to deposit ratio and loan loss provision of GTB 
from 2006 to 2013.   
92 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 21: Loan loss provision and loan to deposit ratio of GT-Bank 
Loan Loss Provision Loan to Deposit ratio
58.60 
41.48 
47.27 36.88 
36.24 
44.86 
38.94 
28.03 
18.39 18.00
14.61
7.78
4.00 4.20 3.26 4.02
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram there is a wide gap or difference between the loan loss provision and loan to 
deposits. The gap became narrow in 2011. 
 
4.2.9 Stanbic Bank (SBL) 
 Brief Background 
Stanbic Bank, a member of the Standard group, was established in Ghana in 2001.  
 Competitive Edge 
As a Pan-African bank, the bank supports local farmers, industries and investors. This draws a 
lot of customers to the bank. 
 
 
93 
 
University of Ghana  http://ugspace.ug.edu.gh
 Why SBL was selected 
SBL was selected because of its position in the banking industry. As at 2013, the bank was the 
fourth largest bank in terms of total deposits.  
 Position in the Industry 
As at 2013, SBL was the fourth largest bank in the industry in-terms of total assets. The bank 
possesses 8.0% of the total assets of the industry (Bank of Ghana, 2014).  The bank is ranked as 
the fifth most profitable bank in the industry with 7.3% of the profit before tax as at 2013 (Bank 
of Ghana, 2014). 
 Market share 
SBL had 2.8% of market share in 2006. It increased to 4.6% in 2008 and as at 2013, it was 6.7%.  
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
Figure 4. 22: The trend of deposits at SBL 
1602.77
1313.8
97.33237.05326.28477.06 639.72 866.93
2006 2007 2008 2009 Deposits in Millions of Ghana Cedis2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
94 
 
University of Ghana  http://ugspace.ug.edu.gh
From the trend SBL total deposits exhibited progressive growth from 2006 to 2010. 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
The line graph below shows the trend in loan to deposit ratio and loan loss provision of SBL 
from 2006 to 2013. 
Figure 4. 23: Loan loss provision and loan to deposit ratio of SBL 
Loan Loss Provision Loan to Deposit ratio
83.76 
74.64 
73.93 
45.87 49.39 58.07 60.87 
50.23 
21.03 18.5
12.1 12.1
7.31 10.36 8.45 6
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision increased from 12.1% in 2006 to 21% in 2009 but 
declined to 5% in 2013.  
95 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.10 Unique Trust Bank (UTB) 
 Brief Background 
Unique Trust (UT) Bank was formerly a non-bank financial institution. It became a member of 
Ghana Banking Industry in 2009. 
 Competitive Edge 
The competitive advantage the bank enjoys is its branding through print and online advertising. 
Also, the bank, which was formerly a non-bank financial institution, is known for its effective 
loan management system  
 Why UT Bank was selected 
The bank was selected for the analysis because of its loan loss provision of 10% which is above 
the industry average of 9% 
 Position in the Industry 
As at 2013, UT Bank was the thirteenth bank in the industry in-terms of total assets. The bank 
possesses 3.7% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the nineteenth most profitable bank in the industry with 0.6% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
The total deposits of UT Bank as at 2013 was 889 million Ghana Cedis, representing 3.7% of 
total deposits of all banks in Ghana as at 2013. This positioned the bank at the eleventh position 
in the banking industry in 2013. But in 2009, when the bank started operations, it attained the 
96 
 
University of Ghana  http://ugspace.ug.edu.gh
twenty-third (23) position in the industry. In 2012, the bank had 2.3% of the total loans in the 
industry and the seventeenth position.  Therefore, the growth of the bank has been impressive 
and tremendous in 2013. The area graph below shows the trend of market share of the bank in 
terms of total deposits from 2006 to 2013. 
Figure 4. 24: The trend of deposits at UT Bank 
889.42
504.6
296.25
163.69
77.73
0 0 0
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend, UT Bank total deposits started increasing from 2009 because in the first three 
years of the analysis, the bank did not exist.  
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
97 
 
University of Ghana  http://ugspace.ug.edu.gh
Loan to deposit ratio offers to show the loans issued which is going out of the bank and the total 
deposits coming into the bank. The line graph below shows the trend in loan to deposit ratio and 
loan loss provision of UT Bank from 2006 to 2013. 
Figure 4. 25: Loan loss provision and loan to deposit ratio of UTB 
Loan Loss Provision Loan to Deposit ratio
174.12 
161.37 
130.70 
102.47 
57.83 
13.01 9.04 7.01 8.43 10.00
0-.00 0-.00 0-.00
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
 
4.2.11 Universal Merchant Bank (UMB) 
 Brief Background 
Universal Merchant Bank until the later part of 2013 was known as Merchant Bank Ghana. The 
bank was established in 1971.   
 
 
98 
 
University of Ghana  http://ugspace.ug.edu.gh
 Competitive Edge 
The competitive edge the bank has is its special products for exporters and local business units. 
The bank is able to draw many customers through their products. 
 Why UMB was selected 
UMB was selected for this analysis because of the number of years it has been in the banking 
industry. 
 Position in the Industry 
As at 2013, UMB was the nineteenth largest bank in the industry in-terms of total assets. The 
bank possesses 2.1% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the twenty-sixth most profitable bank in the industry with -1.5% of the 
profit before tax as at 2013 (Bank of Ghana, 2014). This bank was putting the whole industry 
down because it was recording negative growth. This is one of the reasons why Merchant Bank 
was sold and the name was changed.   
 Market share 
The bank recorded 222.57 million Ghana Cedis deposits in 2006 and it increased to 654.25 
million Ghana Cedis in 2010. It reduced in 2011 but it increased again in 2012. 2013 saw the 
worst results and the bank lost its position in the banking industry. 
 
The line graph below shows the trend of the market share of the bank in terms of total deposits 
from 2006 to 2013. 
99 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 26: The trend of deposits at UMB 
700.64
654.25
599.15
510.96 532.46
321.18 317.82
222.57
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
Loan to deposit ratio offers to show the loans issued which is going out of the bank and the total 
deposits coming into the bank. 
 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of UMB 
from 2006 to 2013.  
100 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 27: Loan loss provision and loan to deposit ratio of UMB 
Loan Loss Provision Loan to Deposit ratio
100.34 
98.16 
94.57 
63.19 68.53 
63.79 
50.08 
41.31 
24.33
16.73
11.24
7
3.2 2.4 3.02 4.07
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 3.2% in 2006 to 7% in 2013 but declined in 
2011. The loan loss provision was increasing, loan to deposit ratios were also increasing. The 
inability of the bank to collect the huge amount of loans in debt led to the selling of the bank in 
the latter part of 2013.  
 
 
 
 
 
 
101 
 
University of Ghana  http://ugspace.ug.edu.gh
 
 
4.2.12 Zenith Bank (ZIB) 
 Brief Background 
Zenith Bank Ghana Limited is a full subsidiary of Zenith Bank PLC Nigeria. It was established 
in Ghana in 2004. 
 Competitive Edge 
The competitive advantage the bank has is the ability to attract students, and its technological 
drive in banking. The bank also seems to get support from its parent company in-terms of 
finance and technical knowledge.  
 Why ZIB was selected 
ZIB was selected for this analysis because of the bank’s position in the industry as a result of its 
total deposits. Also because the bank’s loan loss provision which is the same as the industry 
average of 9%.  
 Position in the Industry 
As at 2013, ZIB was the sixth largest bank in the industry in-terms of total assets. The bank 
possesses 4.5% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the eighth most profitable bank in the industry with 4.5% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
The market share position of ZIB changed from tenth position in 2012 to seventh position 2013. 
102 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
Figure 4. 28: The trend of deposits at ZIB 
1073.02
791.78
610.02
554.41
469.85
334.64
143.62
39.79
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend ZIB’s total deposits increased from 39 million Ghana Cedis in 2006 to 676.57 
million Ghana Cedis. The bank’s progressive successes is pushing the bank to be part of the top 
five banks in only ten years of operations. 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provisions over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
103 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend in loan to deposit ratio and loan loss provision of ZIB from 
2006 to 2013. 
Figure 4. 29: Loan loss provision and loan to deposit ratio of ZIB 
Loan Loss Provision Loan to Deposit ratio
63.05 
46.25 52.33 41.19 
35.05 42.55 41.35 33.37 
11.2 13.35 14.48
18
10.2
5.87 8.51
1.63
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 10.2% in 2006 and it reduced to 1.63% in 2008 
because of effective loan management practices. The lowest loan to deposit ratio was recorded in 
2011 of 33.37%. The highest was recorded in 2013 of 63.05%. 
  
 
 
 
 
104 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.13 CAL Bank (CAL) 
 Brief Background 
CAL bank is a wholly Ghanaian owned bank which was established in 1990.  
 Competitive Edge 
The competitive edge enjoyed by the bank includes, the number of years of existence in the 
banking industry, its market share (total deposits) and the technological nature of the bank.  
 Why CAL bank was selected 
CAL bank was selected for this analysis because of the number of year the bank has been in 
existence in the banking industry and the market share of the bank. 
 Position in the Industry 
As at 2013, CAL bank was the tenth largest bank in the industry in-terms of total assets. The 
bank possesses 4.4% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the seventh most profitable bank in the industry with 6.1% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
The CAL bank had GH 89.89 million Ghana Cedis total deposits in the, out of the total banking 
industry deposits of GH 3,440.03 million Ghana Cedis as at 2006 (Bank of Ghana, 2014).  
 
105 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
Figure 4. 30: The trend of deposits at CAL 
863.24
809.64
590.64
288.17 304.34
177.29
125.6
89.89
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
From the trend CAL bank total deposits increased from 2006, and maintained constant results 
from 2009 and 2010. These increased again in 2011 but started being constant again in 2013.  
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of CAL 
from 2006 to 2013.  
 
 
 
106 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4. 31: Loan loss provision and loan to deposit ratio of CAL  
Loan Loss Provision Loan to Deposit ratio
113.45 
95.32 
90.83 92.32 
87.10 
74.18 
64.38 69.94 
7.10 6.91 9.34 10.305.51 6.97 4.33 4.00
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision of CAL bank was constant ranging from 4% to 10.3%. 
The loan to deposits ratio was in the same range from 64.38% to 113%.  
 
 
 
 
 
 
 
 
 
 
107 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.14 Bank of Africa (BOA) 
 Brief Background 
Bank of Africa, formerly Amalgamated bank, assumed full operations in Ghana in 2012.  
 Why BOA was selected 
BOA was selected for this analysis because of its loan loss provision of 20% in 2013. 
 Position in the Industry 
As at 2013, BOA was the twentieth largest bank in the industry in-terms of total assets. The bank 
possesses 1.7% of the total assets of the industry (Bank of Ghana, 2014). The bank is ranked as 
the twenty-fifth most profitable bank in the industry with -0.1% of the profit before tax as at 
2013 (Bank of Ghana, 2014). 
 Market share 
BOA had 40.86 million total deposits in the banking industry, out of the total deposit in the 
banking industry of 267.5 million Ghana Cedis as at 2013 (Bank of Ghana, 2014). Before 2012, 
the bank   was not in operations.  The line graph below shows the trend of market share of the 
bank in terms of total deposits in 2013. 
Figure 4. 32: The trend of deposits at BOA 
108 
 
University of Ghana  http://ugspace.ug.edu.gh
400.86
0 0 0 0 0 0 0
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of BOA 
from 2006 to 2013.  
Figure 4. 33: Loan loss provision and loan to deposit ratio of BOA 
Loan Loss Provision Loan to Deposit ratio
83.49 
20
0- 0- 0- 0- 0- 0- 0-
2006 2007 2008 2009 2010 2011 2012 2013
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision of BOA was 20% in 2013. But the loan per deposits of 
BOA in 2013 was 83.49%. 
109 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.15 International Commercial Bank (ICB) 
 Brief Background 
ICB was established in Ghana in 2004 under the banking regulations of Ghana.  
 Competitive Edge 
The competitive edge enjoyed by the bank includes the number of years of existence in the 
banking industry, market share (total deposits).  
 Why ICB was selected 
ICB was selected for this analysis because of its position in the industry and the loan loss 
provision.  
 Position in the Industry 
As at 2013, ICB was the twenty-second largest bank in the industry in-terms of total assets. The 
bank possesses 0.8% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the twentieth most profitable bank in the industry with 0.6% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
ICB had 50.85 million total deposits out of the total banking industry deposit 3,440.03 million 
Ghana Cedis as at 2006 (Bank of Ghana, 2014). Before 2013, the bank enjoyed the sixteenth 
position in the market as a result of large deposits from 2006 of 50.85 million Ghana Cedis to 
2012 of 196.59 Million Ghana Cedis. The total market declined to 166.54 in 2013. 
110 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
Figure 4. 34: The trend of deposits at ICB 
122.87 121.27
84.25
46.03
35.34
30.84
23.94
16.24
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of ICB from 
2006 to 2013.  
 
 
 
 
 
111 
 
University of Ghana  http://ugspace.ug.edu.gh
Figure 4.35:  Loan loss provision and loan to deposit ratio of ICB 
Loan Loss Provision Loan to Deposit ratio
72.82 
56.87 
41.81 62.50 
31.94 38.62 41.57 41.56 
18.00
6.62
3.39
-2.00
2006 2007-8.10 2008 2009 2010 2011 2012 2013-10.46 -10.77 -13.39
 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from -2.0% in 2006 to 6.62% in 2010 but declined in 
2012 to -13.3%. In 2013 increased again to 18% far above the industry average of 9%. 
While the loan loss provision was increasing, loan to deposit ratios were also increasing. It 
declined after 2010 and it has enjoyed almost a constant increase in 2012 and 2013.  
 
 
 
 
112 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.16 First Atlantic Merchant Bank (FAMBL) 
 Brief Background 
First Atlantic Merchant Bank (FAMBL) was established in Ghana in 2007.  
 Competitive Edge 
The competitive edge enjoyed by the bank includes, the number of years of existence in the 
banking industry, market share (total deposits) and the differentiated banking products towards 
the affluence in the Ghanaian society.  
 Why FAMBL was selected 
FAMBL was selected for this analysis because of its loan loss provision of 15% above the 
industry average of 9%. 
 Position in the Industry 
As at 2013, FAMBL is the twenty-first largest bank in the industry in-terms of total assets. The 
bank possesses 2.1% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the twenty-third most profitable bank in the industry with 0.1% of the 
profit before tax as at 2013 (Bank of Ghana, 2014). This is not impressive. 
 Market share 
FAMBL had 64.98 million total deposits out of the total banking industry deposit of 3,440.03 
million Ghana Cedis as at 2006 (Bank of Ghana, 2014). Before 2012, the bank enjoyed a good 
position but the total market declined to 200.96% in 2013. 
113 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
254.78
200.96
167.36 163.68
134.16
122.86
107.18
64.98
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Figure 4. 36: The trend of deposits at FAMBL 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of FAMBL 
from 2006 to 2013.  
114 
 
University of Ghana  http://ugspace.ug.edu.gh
Loan Loss Provision Loan to Deposit ratio
130.37 
101.31 
83.17 
86.21 80.57 72.07 
64.32 
30.84 
9.55 10.22 13.06 11.06
15.00
4.00 5.20 3.29
2006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 37: Loan loss provision and loan to deposit ratio of FAMBL 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision increased from 4% in 2006 to 15% in 2013 but 
declined in 2009 of 3.29%. While the loan loss provision was increasing, loan to deposit ratios 
were also increasing.  
4.2.17 Sahel-Sahara Bank (Sahel) 
 Brief Background 
The Sahel-Saharan Bank was established in 2007. 
 Competitive Edge 
The competitive edge enjoyed by the bank includes the number of years of existence in the 
banking industry, market share (total deposits). As a new bank it is appealing to the Ghanaian 
customers who are tired of the treatment they have got from the old existing banks. 
115 
 
University of Ghana  http://ugspace.ug.edu.gh
 Why Sahel Bank was selected 
Sahel Bank was selected for this analysis because of its market share which is above the industry 
average of 9%.  
 Position in the Industry 
As at 2013, Sahel is the twenty-fifth largest bank in the industry in-terms of total assets. The 
bank possesses 0.6% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the twenty-fourth most profitable bank in the industry with 0.1% of the 
profit before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
Sahel Bank had 5.06 million total deposits out of the total banking industry deposits of 7,117.61 
million Ghana Cedis as at 2008 (Bank of Ghana, 2014). But the total market was 124.82 million 
Ghana Cedis in 2013. 
The bar graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
116 
 
University of Ghana  http://ugspace.ug.edu.gh
124.82
107.68
60.43
44.73
0 0 5.06 20.17
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Figure 4. 38: The trend of deposits at Sahel Bank 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of Sahel 
from 2006 to 2013.  
117 
 
University of Ghana  http://ugspace.ug.edu.gh
Loan Loss Provision Loan to Deposit ratio
77.05 
62.15 61.46 
54.21 
44.47 
39.27 
19.00
10.43 10.06
3.53
0- 0- 1.09 2.77
2006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 39: Loan loss provision and loan to deposit ratio of Sahel Bank 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from1.09% in 2008 to 19.00% in 2013 but declined in 
2012 to 10.06%. The loan to deposits was increasing from 2007 2011 but declined 2012.  
 
 
 
 
 
 
118 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.18 UniBank (UNI) 
 Brief Background 
UniBank is a bank established by a former Governor of the Bank of Ghana, Dr. Kwabena 
Duffour, in 1997 
 Competitive Edge 
The competitive edge enjoyed by the bank includes the number of years of existence in the 
banking industry, market share (total deposits) and the technical support the bank receives from 
its founder.  
 Why UNIBANK was selected 
UNIBANK was selected for this analysis because of its position as one of the topmost banks in 
the industry.  
 Position in the Industry 
As at 2013, UNIBANK was the twelfth largest bank in the industry in-terms of total assets. The 
bank possesses 3.6% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the fifteenth most profitable bank in the industry with 13.6% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
UNIBANK had 25.72 million Ghana Cedis deposits out of the total banking industry deposits of 
3,440.03 million Ghana cedis in 2006 (Bank of Ghana, 2014). Before 2012, the bank enjoyed an 
119 
 
University of Ghana  http://ugspace.ug.edu.gh
enviable position in the market as a result of large deposits from 2006, but it increased at a 
diminishing rate towards 2013. 
The line graph below shows the trend of the market share of the bank in terms of total deposits 
from 2006 to 2013. 
1000
900
800
700
600
500
400
300
200
100
0
2006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 40: The trend of deposits at UNIBANK 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of UNI 
from 2006 to 2013.  
120 
 
University of Ghana  http://ugspace.ug.edu.gh
Loan Loss Provision Loan to Deposit ratio
89.62 
78.06 
74.70 
68.17 70.95 69.62 
60.73 58.28 
-4.10 -3.20 -4.67 -2.71 -2.50 -2.64 -2.66 -3.002006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 41: Loan loss provision and loan to deposit ratio of UNIBANK 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from -4.67% in 2008 to -3.00% in 2013 but declined in 
2010 to 2.50%.  While the loan to deposits ratio rose from 2006 to 2013. 
 
 
 
 
 
 
 
 
 
 
121 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.19 HFC Bank (HFC) 
 Brief Background 
Home Finance Company (HFC) bank was established in 1990. 
 Competitive Edge 
The competitive edge enjoyed by the bank includes the number of years of existence in the 
banking industry, the market share (total deposits) and the banking products on housing. 
 Why HFC Bank was selected 
 HFC was selected for this analysis because of its position as one of the topmost banks in 
the industry and the number of years of existence. 
 Position in the Industry 
As at 2013, HFC Bank was the sixteenth largest bank in the industry in-terms of total assets. The 
bank possesses 2.7% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the thirteenth most profitable bank in the industry with 2.5% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
The HFC bank’s market share was 44.63 million Ghana Cedis  deposits out of the total banking 
industry deposit of 3,440.03 million Ghana Cedis as at 2006 (Bank of Ghana, 2014). Before 
2013, the bank had a relatively moderate growth in deposit from 44.63 million Ghana Cedis in 
2006 to 357.81 million Ghana Cedis in 2012. But this figure increased by over 68% to 603.69 
million Ghana Cedis in 2013. 
122 
 
University of Ghana  http://ugspace.ug.edu.gh
The area graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
603.69
357.81
275.27
169.49
121.23
63.68 83.4644.63
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Figure 4. 42: The trend of deposits at HFC bank 
Source: Bank of Ghana Data (2014) 
 Loan loss provision and loan to deposit ratio 
The loan loss provision is the provision over net loans issued to customers. The net loans are 
made of the total loans and advances less the security (collateral) taken from borrowers. The 
provisions are made because it is required by the central bank to make provisions on all loans 
issued out, and also because of prudence concept.  
Loan to deposit ratio offers to show the loans issued which is going out of the bank and the total 
deposits coming into the bank. 
123 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend in loan to deposit ratio and loan loss provision of HFC 
from 2006 to 2013.  
Loan Loss Provision Loan to Deposit ratio
171.11 
161.53 
141.70 
129.54 
104.68 
95.57 
87.03 
78.54 
7.80 6.80 3.85 5.44 4.91 5.20 4.37 4.00
2006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 43: Loan loss provision and loan to deposit ratio of HFC Bank 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss provision of the bank increased from 7.8% in 2006 to 4.00% in 
2013. 
The loan to deposits ratio increased from to 2006 to 2013 but it is not impressive looking the 
number of years it has been in the banking industry. 
 
 
 
124 
 
University of Ghana  http://ugspace.ug.edu.gh
4.2.20 Prudential Bank (PBL) 
 Brief Background 
PBL is a Ghanaian bank. It was established by a former Governor of Bank of Ghana, Dr. J.S. 
Addo. 
 Competitive Edge 
The competitive advantage enjoyed by the bank includes the number of years of existence in the 
banking industry and market share (total deposits). 
 Why PBL was selected 
 PBL was selected for this analysis because of its position as one of the topmost banks in the 
industry. 
 Position in the Industry 
As at 2013, PBL was the eighteenth largest bank in the industry in-terms of total assets. The 
bank possesses 2.3% of the total assets of the industry (Bank of Ghana, 2014).  
The bank is ranked as the seventeenth most profitable bank in the industry with.6% of the profit 
before tax as at 2013 (Bank of Ghana, 2014). 
 Market share 
PBL had GH¢104.62 million total deposits out of the total banking industry deposit of 3,440.03 
million Ghana Cedis as at 2006 (Bank of Ghana, 2014). But the total market share increased to 
693.13 million Ghana Cedis in 2013. 
125 
 
University of Ghana  http://ugspace.ug.edu.gh
The line graph below shows the trend of market share of the bank in terms of total deposits from 
2006 to 2013. 
693.13
555.19
459.46
339.49
251.28
178.16 195.29
104.62
2006 2007 2008 2009 2010 2011 2012 2013
Deposits in Millions of Ghana Cedis
 
Figure 4. 44: The trend of deposits at PBL 
Source: Bank of Ghana Data (2014) 
From the trend PBL total deposits increased over the eight (8) year period of analysis. This is 
impressive looking at the customer base and the assets being managed by the bank. 
 Loan loss provision and loan to deposit ratio 
The line graph below shows the trend in loan to deposit ratio and loan loss provision of PBL 
from 2006 to 2013.  
126 
 
University of Ghana  http://ugspace.ug.edu.gh
Loan Loss Provision Loan to Deposit ratio
96.41 
85.37 
81.41 76.97 75.81 
71.44 
64.24 64.69 
6.00 8.90 4.94 4.77 5.67 6.77 7.04 7.00
2006 2007 2008 2009 2010 2011 2012 2013
 
Figure 4. 45: Loan loss provision and loan to deposit ratio of PBL 
Source: Bank of Ghana Data (2014) 
From the diagram, the loan loss increased from 6% in 2006 to 7% in 2013 but declined in 2008 
of 4.94. In 2013 it increased to 7%, far below the industry average of 9%. The loan to deposits 
ratio increased over the period of analysis. 
 
 
 
 
 
127 
 
University of Ghana  http://ugspace.ug.edu.gh
4.3 Relationship between corporate governance practices and loan loss provision 
This section of the analysis looks at the relationship between the corporate governance practices 
on loan administration and the non-performing loans (loan loss provision).  
 It looks at the relationship from two multivariate data analysis techniques: linear regression and 
correlation and the interpretations from their results based on the model developed in chapter 
three. 
 
4.3.1 Multivariate data analysis 
 
The data obtained for analysis are as seen in the Appendix attached. Multiple regression analyses 
were carried out using Windows 7 Excel data analysis. The required expectation is that corporate 
governance should have a POSITIVE relationship with the level of non-performing loans (Loan 
Loss Provision) of the selected banks in Ghana. The result is as seen in table 2 below: 
 
 
 
 
 
 
 
 
 
128 
 
University of Ghana  http://ugspace.ug.edu.gh
Table 4. 1: Regression on the relationship between corporate governance and loan loss 
provision (Non-Performing Loans) 
 
 Standard  P-  Lower  Upper  Lower  Upper 
  Coefficients  Error   t Stat  value  95%  95%  95.0%  95.0%  
                                                     
Intercept       (20.74) 14.83  (1.40) 0.20  (54.29) 12.80  (54.29) 12.80  
                                                                  
 BD            0.29  0.46  0.64  0.54  (0.75) 1.33  (0.75) 1.33  
                                                                  
 CC            0.49  1.21  0.40  0.70  (2.25) 3.23  (2.25) 3.23  
                                                                  
 LU            0.12  0.75  0.17  0.87  (1.58) 1.82  (1.58) 1.82  
                                                                  
 RM            1.34  0.66  2.04  0.07  (0.14) 2.83  (0.14) 2.83  
                                                                
 CRM          (0.28) 0.87  (0.33) 0.75  (2.26) 1.69  (2.26) 1.69  
                                                                  
 CM            1.35  0.75  1.81  0.10  (0.34) 3.04  (0.34) 3.04  
                                                                
 CAL          (0.01) 0.75  (0.01) 0.99  (1.71) 1.69  (1.71) 1.69  
                                                                
 LT          (0.25) 0.71  (0.36) 0.73  (1.86) 1.35  (1.86) 1.35  
                                                                
 AC          (0.49) 0.55  (0.90) 0.39  (1.74) 0.75  (1.74) 0.75  
                                                                  
 BG            0.82  0.87  0.94  0.37  (1.16) 2.79  (1.16) 2.79  
 
Significance 
F 
0.163488  
Regression Statis tics 
Multiple R 0.827627 
R Square 0.684966 
Adjusted R 
Square 0.334929 
Standard Error 6.962999 
Observations 20 
 
 The estimated Reg. model; NPL = -20.74 + 0.29BD + 0.49CC + 0.12LU + 1.34RM – 
0.28CRM + 1.35CM – 0.01CAL – 0.25LT – 0.49AC + 0.82BG 
129 
 
University of Ghana  http://ugspace.ug.edu.gh
The variables CRM, CAL, LT and AC show a negative relationship with the level of non-
performing loans consistent with the established assumption. The remaining variables; BD, CC, 
LU, RM, CM and BG have shown a positive relationship to the contrary.  
 
From the result in the Table above, the coefficient of BD is 0.29 and this means that BD is 
positively related to the NPL of the banks selected. However, the ‘p’ value of 0.54 with the 
probability clearly shows that BD has no significant relationship with NPL. Similarly, from the 
result, the RM coefficient of 1.34 is positively related to NPL. However, RM’s has a t-statistic of 
0.29 with the p-value of 0.07. This means that BC has no significant relationship with NPL 
(Loan Loss provision) of the banks.  
 
Also, from the results, the p-value of all the other independent variables is greater than 0.05, 
defeating the required statement.  
 
Also from Table 2 above, the composition of CRM, which has the coefficient of –0.28, shows an 
inverse relationship with dependent variable (NPL). However, the t-statistic value of CRM of -
0.33 with the p-value of 0.75 means that the relationship is not statistically significant. In the 
same vein, AC which has the coefficient of -0.49 shows that there is an inverse relationship 
between AC and NPL. However, with a t-statistic value of -0.90 with the probability of 0.39 it 
means that the relationship between AC and NPL is not statistically significant. CRM, LT, AC, 
CM and BG are dummy variables and they will work or not when the conditions attached in 
chapter 3 are met. 
 
130 
 
University of Ghana  http://ugspace.ug.edu.gh
The overall model, as measured by the F-statistic of 0.16, which is statistically not significant 
indicates that the Corporate Governance in the Ghanaian banking sector, taking all the 
independent variables into consideration, has a significant impact on the NPL of banks in Ghana. 
The R2 of 0.68 means that only 68% of the total variation in a dependent variable (NPL) is 
explained by all the independent variables. This is a strong fit, as it shows that a large percentage 
(more than 51%) can be explained by the Corporate Governance variables of BD, CM, AC, RM, 
CC and the other independent variables. Also, the adjusted R2 shows 0.33, which is low. 
 
From the table, the influence of Bank of Ghana (the banking sector regulator) is prominent in the 
analysis, and the general administration of loans in the industry. That means that whatever 
policies the Bank of Ghana makes, has direct effects on the loan administration systems of all 
banks in Ghana. The Bank of Ghana (BG) has a coefficient of 0.82 and a p-value of 0.37, which 
shows the influence the central bank has in loans administration. 
 
 
 
 
 
 
 
 
 
 
131 
 
University of Ghana  http://ugspace.ug.edu.gh
4.3.2 Correlation 
 
The correlation result shows a weak relationship between non-performing and corporate 
governance elements. That means that the corporate governance elements are weak to ensure that 
quality loans are given and managed in the already issued ones 
 
Table 4. 2: Correlation between the Non-Performing Loans (Loan Loss Provision) and 
corporate governance elements in 20 selected banks in Ghana 
   NPL   BD   CC   LU   RM   CRM   CM   CAL   LT   AC   BG  
          
 NPL  1.00  
                             
 BD  0.36  1.00  
                                  
 CC  (0.15) (0.20) 1.00  
                                             
 LU  0.34  0.45  (0.21) 1.00  
                                                      
 RM  0.67  0.22  (0.14) 0.39  1.00  
                                                           
 CRM  (0.01) 0.03  0.19  (0.04) (0.11) 1.00  
                                                                      
 CM  0.50  0.18  (0.08) (0.07) 0.27  0.34  1.00  
                                                                         
 CAL  (0.14) (0.01) (0.36) (0.15) (0.37) 0.34  0.26  1.00  
                                                                                      
 LT  0.03  0.11  (0.00) (0.41) 0.17  (0.06) 0.23  0.11  1.00  
                                                                                                   
 AC  0.04  0.43  0.03  0.23  0.21  0.26  0.13  (0.05) 0.24  1.00  
                                                                                                      
 BG  0.18  0.41  (0.33) 0.27  (0.01) 0.05  (0.10) 0.16  (0.10) 0.18  1.00  
 
From the above table, RM and CM are strongly related to NPL, confirming the results in the 
regression analysis. CC, CRM and CAL have a weak impact on the control of non-performing 
loans. 
.  
 
132 
 
University of Ghana  http://ugspace.ug.edu.gh
CHAPTER FIVE 
SUMMARY, CONCLUSION AND RECOMMENDATIONS 
5.1 Introduction 
The previous chapters concentrated on the introductory aspects of the study which dealt with the 
background of the study, the problem statement, objectives and justification of the study, the 
scope and limitation of the study.  The previous chapters also reviewed the relevant literature on 
the study;  the methodology and the profile of the study area were also clearly espoused. Finally, 
the data gathered through secondary data were also analysed, which brought to bear the possible 
solutions to the questions raised at the introductory chapter. 
 
This chapter summarizes the findings analysed from the data gathered in Chapter Four. It also 
discusses the researcher's recommendations and the conclusion to the study.   
 
5.2 Summary of findings 
 
5.2.1 The trend of loan loss provision of sampled banks 
 
 From the analysis, the banking industry used to be dominated by three banks: namely 
Ghana Commercial Bank, Barclays Bank and Standard Chartered Bank. These banks 
have been in the banking industry for more than sixty (60) years now. These banks were 
the topmost banks until Ecobank came in 2008, when the bank made a lot of acquisitions 
and mergers. Currently, the bank is the biggest bank in Ghana with a deposit of 13.9% of 
the total deposits in the entire bank in 2013. 
133 
 
University of Ghana  http://ugspace.ug.edu.gh
 The competitive advantages the banks enjoy depend on so many things: their products, 
their experiences in the banking industry, their financial supports from their parent 
companies and the government, and the technological tools used by the banks. 
 The market share positions of the banks saw changes which affected the existing and old 
banks. The market share of GCB, BBG and SCB dipped. All the banks show a deposit 
trend of increase, except MBG (UMB) that saw a negative growth in total deposits in 
2012 and 2013. 
 The loan loss provisions of the banks achieved a constant growth; eleven banks go away 
from the industry average as at 2013. 
 
5.2.2 Summary from the relationship between corporate governance practices and loan loss 
provision  
 
It is expected that non-performing loans should decrease if Corporate Governance is effective. 
However, from the above analysis, it was discovered that all the explanatory variables are 
statistically significant. This simply means, they have a significant impact on non-performing 
loans of commercial banks in Ghana. A likely explanation of this could be the way things are 
being done in the Ghanaian Banking Sector, for instance, the way committees of the banks are 
being constituted. This affects the way the committee discharges its functions. Members of the 
audit committee in banks are mixed, that is both finance and non- finance members constitute the 
committee. The risk management of most banks is ineffective or non-existent in many banks.  
 
The findings of this study suggest that effective Corporate Governance practices helps in 
providing solution to the problem of non-performing loans, a phenomenon that has been the 
134 
 
University of Ghana  http://ugspace.ug.edu.gh
undoing of commercial banks in Ghana for many decades now. A thorough analysis of the banks 
from 2006 to 2013 attests to this fact. The reason for sacking credit managers and the change of 
the position of key managers of banks by the top of all the banks in this analysis confirms the 
findings of this study; that the banks’ officials were removed or changed to other areas of 
management due to the high level of non-performing loans which are attributable to poor 
corporate governance practices, lax credit administration processes, and the absence or non-
adherence to the banks’ credit management practices. The finding of the study confirms the 
position of Nworji et al (2011) that the consistent increase in the figure of non-performing loans 
of commercial banks in recent times has raised questions on the consistency and effectiveness of 
corporate governance practices in the banking sector. 
 
5.3 Conclusion and Recommendations 
 
This study finds that corporate governance variables of board of directors, credit committees, 
lending units, relationship management, credit monitoring and the Bank of Ghana have a 
significant impact on non-performing loans of commercial banks. Hence, the study concludes 
that, these corporate governance variables (BD, CC, LU, RM, CM and BG) can be relied upon to 
solve the problem of non-performing loans of Ghanaian banks. Consequently, the study 
recommends that emphasis should not only be on these explanatory variables but on other 
corporate governance variables, such as; insider abuse, transparency, disclosure and 
accountability in line with loan management. Also the oversight and monitoring functions of the 
135 
 
University of Ghana  http://ugspace.ug.edu.gh
Bank of Ghana should be strengthened to ensure adherence to rules and principles guiding the 
approval and monitoring of loans and advances. 
Further studies are strongly recommended to be done to know how other corporate governance 
elements impact on loan management and performance in Ghanaian Banks. 
 
 
 
 
 
 
 
 
 
 
 
 
136 
 
University of Ghana  http://ugspace.ug.edu.gh
BIBLIOGRAPHY 
1. A. Q. Q. Aboagye, S. K. Akoena, T. O. Antwi-Asare &  F. A. Gockel, (2008), Explaining 
Interest Rate Spreads in Ghana. African Development Review,  20(3), 378 - 399. 
2. Aboagye, A. Q & J. Otieku, (2010), Are Ghanaian MFIs’ performance associated with 
corporate governance?. Corporate Governance,  10(3), 307-320. 
3. Abor, J., & Quartey, A. (2010), Issues in SME Development in Ghana and South Africa, 
International Research Journal of Finance and Economics,  39(6), 215-228.  
4. Agrawal, A., Chadha, S., (2005). Corporate governance and accounting scandals. Journal 
of Law and Economics, 48, 371–406. 
5. Armstrong, C.S., Balakrishnan, K., Cohen, D., (2010a). Corporate governance and the 
information environment: evidence from state antitakeover laws. Working Paper. 
6. Bebchuk, L, Cohen, A. & Ferrell, A. (2004). “What Matters in Corporate Governance 
and Control” NBER Working Papers, No. 9371, National Bureau of Economic Research, 
Inc. Cambridge MA.  
7. Berglöf, Erik & Von Thadden, Ernst-Ludwig, (1999), The Changing Corporate 
Governance Paradigm: Implications for Transition and Developing Countries (June 
1999). Conference Paper, Annual World Bank Conference on Development Economics, 
Washington D.C. Available at SSRN: http://ssrn.com/abstract=183708 or 
http://dx.doi.org/10.2139/ssrn.183708 
8. Cadbury, Sir A. (1999). Sir, what are the trends in corporate governance? How will they 
impact your company? Long Range Planning,  32, 12-19.  
9. Claessens, S., Ueda, K., Yafeh, Y., (2010). Financial frictions, investment, and 
institutions. CEPR Discussion Paper No. DP 8170. 
137 
 
University of Ghana  http://ugspace.ug.edu.gh
10. Francis, J.R., Martin, X., (2010). Acquisition profitability and timely loss recognition. 
Journal of Accounting and Economics, 49, 161–178. 
11. Garcia-Marco, T & Robles-Fernandex, MD (2008), ‘Risk-taking behaviour and 
ownership in the banking industry: The Spanish evidence. Journal of Economics and 
Business, vol.60, .4, 332-354. 
12. Gompers, P.A., Ishii, J.L. & Metrick, A. (2003), Corporate governance and equity prices. 
Quarterly Journal of Economics,  118(1), 107-55.  
13. Greuning, H. & Bratanovic, S.B. (2003), Analyzing and Managing Banking Risk: A 
Framework for Assessing Corporate Governance and Financial Risk, 2nd ed., The World 
Bank, Washington, DC. 
14. Jensen, M. & William, M. (1976). Theory of The Firm: Managerial Behavior, Agency 
Costs and Ownership Structure. Journal of Financial Economics, 3, 305-360. 
15. Jensen, M. C. (1994). The modern industrial revolution, exit, and the failure of internal 
control systems. Journal of Applied Corporate Finance, 6(4), 4-23. 
16. Jensen, M.C. (1993). The modern industrial revolution, exit, and the failure of internal 
control systems. Journal of Finance, 48(3), 831- 857. 
17. Kirkpatrick G. (2009). The Corporate Governance Lessons from the Financial Crises. 
OECD Vol.2009/1. 
18. Kyereboah-Coleman, A. and N. Biekpe, (2006), “Corporate Governance and Financing 
Choices  of Firms: a Panel Data Analysis,” South African Journal of Economics, 
vol.74(4), 670- 681 
138 
 
University of Ghana  http://ugspace.ug.edu.gh
19. Kyereboah-Coleman, A. and Biekpe, N. (2006b). Do boards and CEOs matter for bank 
performance? A comparative analysis of banks in Ghana. Journal of Corporate 
Ownership and Control. 4(1), 119–126  
20. Lawer, T. F (2012) “Evaluation of Credit Management Practices in Ghana Commercial 
Bank Limited” KNUST 
21. Linck, J., Netter, J., Yang, T., (2008). The determinants of board structure. Journal of 
Financial Economics 87, 308–328.  
22. Nworji, I. D., Adebayo, O., & David, A. O. (2011). Corporate governance and bank 
failure in Nigeria: Issues, challenges and opportunities. Research Journal of Finance and 
Accounting, 2(2), 1-19. 
23. OECD principles, 2004; www.oecd.org  
24. Oldfield, G.S. and Santomero, A.M. (1997). Risk management in financial institutions. 
Sloan Management Review, . 39(1), 33-46. 
25. Owusu, O.K.O (2008), “Credit Management Practices of two Rural Banks in the Greater 
Accra Region” Unpublished, University of Cape Coast 
26. Rebeiz, K. S. & Salameh, Z (2006), Relationship between governance structure and 
financial performance in construction. Journal of Management in Engineering, 22(1), 20-
26 
27. Sarbah, A (2014), Corporate governance practices in Ghanaian family businesses: 
Conceptual framework. International Journal of Advancements in Research & 
Technology,  3(1), 100 ISSN 2278-7763 
28. Shleifer, A & Robert W. V, (1994) Politicians and firms. Quarterly Journal of Economics 
109/4, 995-1025. 
139 
 
University of Ghana  http://ugspace.ug.edu.gh
29. Shleifer, A., & R.W. Vishny, (1997), A Survey of Corporate Governance, Journal of 
Finance, 52, 737-783. 
30. Smith, A. (1976). The wealth of nations. Edited by Edwin Cannan, 1904, London: 
Methuen & Co. Ltd 
31. Tetteh, E. N. N. (2011), “Assessment of Loan Quality: Evidence from Listed Banks”. 
Unpublished, Kwame Nkrumah University of Science Teachnology, PG3094909 
32. Tshorhe, J. S, A. Q. Q. Aboagye, and Kyereboah-Coleman, A  (2012), “Corporate 
Governance and Bank Risk Management in Ghana” Unpublished, University of Ghana 
Business School. 
33. Zakaria, N.B. (2012) “Corporate Governance and the Relationship between Default Risk 
and Earnings response Coefficient” Victoria University of Wellington 
 
 
 
 
 
 
 
 
140 
 
University of Ghana  http://ugspace.ug.edu.gh
APPENDICES 
 
Appendix 1: Table of Deposits of Banks in Ghana as at 2013 
 
RANKING BY TOTAL DEPOSITS 
  BANKS Year 2013 % 
1 EBG                 3,305  13.9% 
2 GCB                 2,636  11.1% 
3 SCB                 1,779  7.5% 
4 SBL                 1,603  6.7% 
5 BBG                 1,598  6.7% 
6 FIDELITY                 1,305  5.5% 
7 ZIB                 1,073  4.5% 
8 ADB                 1,066  4.5% 
9 SG-SSB                    926  3.9% 
10 UNI                    918  3.9% 
11 UT BANK                    889  3.7% 
12 CAL                    863  3.6% 
13 NIB                    776  3.3% 
14 Access                    727  3.0% 
15 GT BANK                    709  3.0% 
16 PBL                    693  2.9% 
17 UBA                    652  2.7% 
18 HFC                    604  2.5% 
19 MBG                    532  2.2% 
20 BoA                    401  1.7% 
21 FAMBL                    201  0.8% 
22 ICB                    167  0.7% 
23 ROYAL                    137  0.6% 
24 Sahel                    125  0.5% 
25 Energy                     93  0.4% 
26 Baroda                     61  0.3% 
  TOTAL               23,839  100.0% 
 
 
 
 
141 
 
University of Ghana  http://ugspace.ug.edu.gh
Appendix 2: Year of Establishment & Number of Years of Existence of All Banks in Ghana 
as at 2013 
BANK         Year Established Years of Existence 
GCB 1953 60 
EBG 1990 23 
ADB 1965 48 
BBG 1917 96 
BOA 1997 16 
BOB 2011 2 
CAL 1990 23 
EBL 2011 2 
FBL 2006 7 
FAMBL 2007 6 
FCPB 2012 1 
GTB 2007 6 
HFC 1990 23 
MBG(UMB) 1990 23 
NIB 1963 50 
PBL 1996 17 
SG-SSB 1975 38 
RBL 2012 1 
UT 2009 4 
UNI 1997 16 
UBA 2004 9 
SBL 2001 12 
SCB 1896 117 
ZIB 2008 5 
ICB 2004 9 
ACCESS 2009 4 
SAHEL 2005 8 
ENERGY  2009 4 
   
 
 
 
 
 
142 
 
University of Ghana  http://ugspace.ug.edu.gh
Appendix 3: Data for the Trend Analysis of the 20 selected Banks 
Source: Bank of Ghana (2014) 
Deposits 
  Banks 2006 2007 2008 2009 2010 2011 2012 2013 
 1 GCB 639.18 844.43 1,047.33 1,262.16 1,579.69 2,055.22 2,338.06 2,635.52 
2 SCB 445.54 534.84 745.61 843.97 1,092.71 1,502.43 1,704.18 1,779.13 
3 BBG 450.18 654.78 932.86 987.84 1,098.27 1,341.65 1,462.70 1,598.31 
4 EBG 304.14 407.80 634.57 899.48 1,123.06 1,624.31 2,530.45 3,304.88 
5 GT Bank 12.54 32.51 91.45 179.98 286.89 310.05 518.65 708.97 
6 PBL 104.62 178.16 195.29 251.28 339.49 459.46 555.19 693.13 
7 SG-SSB 236.77 279.93 298.86 382.92 495.40 625.77 856.46 926.13 
8 UNI 25.72 57.33 92.43 190.83 316.10 453.64 715.57 918.06 
9 UT Bank 0.00 0.00 0.00 77.73 163.69 296.25 504.60 889.42 
10 FAMBL 64.98 107.18 254.78 167.36 134.16 122.86 163.68 200.96 
11 Sahel 0.00 0.00 5.06 20.17 44.73 60.43 107.68 124.82 
12 CAL 89.89 125.60 177.29 288.17 304.34 590.64 809.60 863.24 
13 MBG 222.57 321.18 317.82 510.96 654.25 599.15 700.64 532.46 
14 HFC 43.63 63.68 83.46 121.23 169.49 275.27 357.81 603.69 
15 SBL 97.33 237.05 326.28 477.06 639.72 866.93 1,313.80 1,602.77 
16 NIB 139.94 217.08 242.95 345.98 467.69 732.55 705.59 775.85 
17 ADB 236.48 272.66 321.71 429.68 539.34 835.21 969.46 1,066.45 
18 ZIB 39.79 143.62 334.64 469.85 554.41 610.02 791.78 1,073.02 
19 BOA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 400.86 
20 ICB 50.85 61.99 74.19 85.04 110.09 148.14 196.59 166.54 
      Adva nces    
  Banks 2006 2007 2008 2009 2010 2011 2012 2013 
 1 GCB 366.60 727.29 1,078.88 1,325.12 960.03 432.69 834.36 922.73 
2 SCB 239.20 286.45 459.90 420.63 448.69 589.14 945.59 1,114.02 
3 BBG 366.11 645.90 724.75 469.67 388.88 600.13 726.22 913.60 
4 EBG 162.37 286.25 398.22 450.45 490.83 835.93 1,367.04 2,119.30 
5 GT Bank 3.52 12.66 41.02 105.47 135.62 112.36 215.12 261.47 
6 PBL 89.31 114.45 188.28 204.56 242.54 297.23 427.33 525.48 
7 SG-SSB 141.65 212.44 273.50 305.77 192.83 344.55 520.10 743.85 
8 UNI 15.62 39.08 65.58 111.22 220.07 353.96 534.51 822.78 
9 UT Bank 0.00 0.00 0.00 44.95 285.02 478.05 659.50 911.38 
10 FAMBL 56.02 68.94 78.57 169.55 174.91 102.18 131.88 144.83 
11 Sahel 0.00 0.00 2.25 7.92 24.25 37.56 66.18 96.18 
12 CAL 85.68 114.08 154.42 185.53 225.75 413.10 747.39 979.33 
143 
 
University of Ghana  http://ugspace.ug.edu.gh
13 MBG 218.47 303.75 318.91 322.86 448.35 247.50 350.85 339.66 
14 HFC 63.24 102.86 142.81 157.04 177.43 216.20 341.97 525.42 
15 SBL 72.64 198.55 241.23 218.85 315.95 503.45 659.88 975.58 
16 NIB 150.87 200.30 287.12 300.06 297.83 318.19 393.04 475.74 
17 ADB 152.82 222.93 365.63 347.96 576.99 652.62 782.03 915.66 
18 ZIB 13.98 66.43 142.38 194.28 290.15 203.57 326.15 676.57 
19 BOA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 334.66 
20 ICB 16.24 23.94 30.84 35.34 46.03 84.25 122.87 121.27 
 
 
          
 
Trend of Loan Loss Provision (LLP) Ratios for Sampled Banks 
Banks 2006 2007 2008 2009 2010 2011 2012 2013 
GCB 2.3 2.86 2.8 5.36 19.57 39.26 28.83 31 
SCB 5.23 6.6 8.13 16.2 11.92 8.92 8.94 10 
SG-SSB 10.8 10 5.02 4.89 7.62 8.63 5.01 5 
BBG 4.1 4.4 7.9 26.4 28.86 18.02 5.7 8 
ADB 9.4 13.6 12.26 17.65 4.07 5.03 5.99 8 
NIB 16.6 16.6 11.17 21.53 18.62 16.53 18.43 13 
EBG 7.4 6.7 3.33 4.41 4.96 2.6 5.91 5 
UMB 3.2 2.4 11.24 24.33 16.73 3.02 4.07 7 
ZIB 10.2 11.2 1.63 5.87 8.51 13.35 14.48 18 
SBL 12.1 12.1 7.31 21.03 18.5 10.36 8.45 6 
FAMBL 4 5.2 9.55 3.29 10.22 13.06 11.06 15 
PBL 6 8.9 4.94 4.77 5.67 6.77 7.04 7 
ICB -2 -8.1 -10.46 -10.77 6.62 3.39 -13.39 18 
BOA 8 9 3.76 5.07 5.09 20.58 20.3 20 
UTB 0 0 0 13.01 9.04 7.01 8.43 10 
HFC 7.8 6.8 3.85 5.44 4.91 5.2 4.37 4 
GTB 4 4.2 3.26 4.02 7.78 14.61 18.39 18 
Sahel 4.2 3.1 1.09 2.77 3.53 10.43 10.06 19 
CAL 7.1 6.91 5.51 9.34 10.3 6.97 4.33 4 
UNI -4.1 -3.2 -4.67 -2.71 -2.5 -2.64 -2.66 -3 
 
144