Regulatory Structures and Bank –Level Risk Management in Ghanaian Banks

This research examines the impact of certain bank-specific variables on bank stability in Ghana, in the context of the existing regulatory structures. The thesis examines this issue along two main themes. The first part of this study examines whether two of the commonly used measures of banking stability, the CAMELS and the Z-Score, provide similar or different results in assessing the stability of banks in Ghana. The results of this study show that the use of the CAMELS and the Z-score measures could lead to different outcomes in terms of bank stability in Ghana. This suggests that the traditional micro-prudential CAMELS framework should be complemented with the Z-score which inherently has both micro and macro-prudential characteristics of signaling weaknesses in bank stability, and to enhance the management of bank stability. The second part of the study examines the impact of some bank-specific variables on bank stability. Using the panel data approach, the results show that while bank size, regulatory governance, regulatory independence and origin impact significantly on the stability score, there was no significant impact in terms of interbank borrowing and non-performing loans. Further analysis using the Blinder –Oaxaca decomposition also suggests that foreign banks in Ghana exhibit relatively higher levels of stability compared to local banks. The policy implications of these findings suggest that the liberalisation of the banking sector should be accompanied by an effective micro- and macro-prudential supervisory regime in order to manage the stability of the constituent banks and the banking sector as a whole