CHAPTER 1

THE LEGAL FRAMEWORK OF BANKING

Introduction
The legal framework of banking is constituted within the broad framework of the law governing
the country. It includes decided cases, legislation and regulatory infrastructure put in place to
regulate the operations of banks in the country. This chapter seeks to trace the origins of
banking law and various aspects of the law influencing banking law as well as lay out the
regulatory structure in place that governs the activities of banks in this country.
Sources of Law in Ghana
It is important at this stage to consider the basis or regime of law that governs this country as it
is a peculiar form inherited from our colonial master, England. The Constitution of Ghana
provides that the constitution is the supreme law governing the people of the country and any
law inconsistent with the provisions of the constitution are to the extent of the inconsistency
void1.
The constitution further defines the scope of what constitutes the laws of Ghana as follows2:

 This constitution
 Enactments made by or under an authority conferred by the parliament established by this
constitution
 Any order, rules or regulations made by any person or authority under an authority conferred
by the constitution
 The existing law
 The common law
The Common Law
The Constitution of Ghana defines the common law (in the broad sense) as the rules of law
generally known as the common law (the common law in the narrow sense), the rules generally
known as the doctrines of equity, and the rules of customary law including those determined by
the Superior Court of judicature3.
Ghana belongs to the legal jurisdictions normally referred to as the common law jurisdictions as
distinct from the civil law jurisdictions. Common law, in the broad sense, refers to jurisdictions
that have adopted or taken on the characteristics of English Law by virtue of their being former
colonies of England. These jurisdictions include former colonies such as United States of
America, Australia, Canada, Ghana, Nigeria, Kenya, Gambia, South Africa and India.
The common law in the narrow sense refers to the rules of law developed in England following
the Norman Conquest of England under William the Conquerer, in the battle of Hastings in 1068
AD. In order to assert his authority over the conquered territory William of Orange, first vested
title in the land on the crown of England. Prior to the conquest, a feudal system was in the
process of development whereby land was held by various barons. To this system William I and

1
Constitution 1992, Article 1 (2)
2
Ibid Article 11
3
Ibid, Art. 11 (2)
his successors superimposed a national system whereby the crown granted lands to his Lords,
who in term granted the land to tenants who held the land subject to provision of certain
services to the Lord or Crown.
Secondly he instituted a judiciary regime whereby he appointed itinerant justices to go round his
territory administering justice. Again, prior to the institution of the judiciary regime, various
communities had their laws based on custom peculiar to the particular community. Over time,
the justices strived to bring uniformity to these different rules and in this way, they developed a
law that was “common” to all communities in England.
The fundamental feature of the common law is that it was based on decisions of judges in cases
decided in the past, which then served as the basis for decision on cases that fell on “all four”
with the decided case. This is known as the doctrine of precedent or “stare decisis”. Opinions of
judges on other matters that are not the subject of judgement were also taken into consideration
in adjudication of current cases. These opinions are referred to as “obiter dicta”.
The Doctrines of Equity
It is important for banking law students to appreciate that there developed in England another
stream of legal principles that were applied as a supplement to the common law until the
unification of both streams by the English Judicature Acts of 1873 and 1875. This is because
the use of terminology such as equitable mortgages, and equitable interests, would be
confusing without a clear background of how these rights and interests were incorporated into
English law.
This stream of law, generally termed as equity was developed to address the shortcomings of
the common law that arose and festered over time. Shortcomings of the common law included
rigidity, a limited avenue for redress for breach of contract and lack of recognition of certain
rights such as the rights of a beneficiary in a trust or the rights of a mortgagor when all the
formalities for executing a mortgage at common law (legal mortgage) had not been executed.
Enactments of Parliament of the 4th Republic
Enactments of the Parliament of the 4th Republic are laws passed by the parliament of the
current republic. In the common law jurisdictions, legislations are passed to introduce new laws,
modify old laws or codify common law rules as embodied in case law. The legislation are
referred to as Acts and have a title and an Act number. The number of the Acts passed by the
4th Republic follow the numbering of the Acts passed in the previous republics.
Orders Rules and Regulations
The law of Ghana also comprises “any order, rules or regulations made by any person or
authority under an authority conferred by the constitution”4. These orders rules or regulations
are promulgated by means of Executive Instruments (EI) Constitutional Instruments (CI) or
Legislation Instruments (LI).

Customary Law
4
Constitution 1992
The customary law refers to rules of law which by custom are applicable to particular
communities in the country. For example, succession laws may differ between matrilineal and
patrilineal communities in the country.
Existing Law
The existing law comprises the written and unwritten laws of Ghana as they existed immediately
before the coming into pass of the Constitution5 and any Act, Decree, law or statutory
instrument issued or made before that date which is to come into force on or after that date
Sources of Law
Banking Law is essentially derived from the laws of the country. Banking law therefore derives
its laws from the common law, the doctrines of equity, customary law, Acts of Parliament, and
subsidiary legislation.
It is also important to trace which aspects of the common law affects the law of banking.
Banking essentially falls under private law which deals with the law affecting the relationship
between the citizens and private institution such as banks. Notwithstanding, there are elements
of criminal law which may come into play especially as regards compliance with banking
legislation, Bank of Ghana directives and antimony laundering laws.
Classification Of Law
As the subject of law has developed to cover various aspects of society, it has developed clear
areas of specialization that distinguishes one aspect of the law from the other. An important
classification that has been made is between Public Law as against Private Law.

Public Law is concerned with cases in which the state is involved and where the public has a
direct interest in the result6. It therefore includes criminal law, constitutional law and
administrative law. It extends to include the law is it relates to welfare services, public
corporations and the many functions of local government7.

Private law as regards this classification is concerned with all branches of law where one
individual be it a living person or institution, is claiming against another. It therefore includes
Contract Law, Family Law, Tort Law, Commercial Law (including mercantile law), trust law and
property law.

Influences on Banking Law

In terms of classification of laws, banking law derives from various aspects of private law
including contract law, tort law, mercantile law, and general commercial law. There are also
elements of trust law, and succession law. In addition to private law, banks need to concern
themselves with some aspects of criminal law such as sanctions imposed by the regulatory
authorities and financial crime authorities such as the Economic and Organized Crime Office
(EOCO).
Sources of Banking Law
5
1992
6
Keith Eddy The English Legal System (3rd Edn, Sweet & Maxwell 1982) 153
7
Ibid
In effect the banking law has two major sources:

 Case law in various aspects of private law

 Legislation governing various aspects of private law and public laws affecting banking.
Key legislation affecting banks in the country include:

 Bank Of Ghana Act 2002, Act 612, Amendment Act 918

 Banks and Specialized Deposit Taking Institutions Act 2016
Act 930
 Anti-Money Laundering Act, 2008 Act 749Bills Of Exchange
Act, Act 55 Of 1961
 Borrowers And Lenders Act, 2008 Act 773Bodies Corporate
(Official Liquidation) Act 1963 Act 180
 Credit Reporting Act 2007 (Act 726)
 Data Protection Act 2010 Act 843
 Non-Bank Financial Institutions Act, 2008 Act 774Company
Act, 1963 Act 179
 Home Finance Mortgage Act 2008 Act 770
 Mortgages Decree, 1972, NRCD 96
 Financial Administration Act 2003, Act 654
 Financial Leasing Act 1993 PNDC Law 331
 Foreign Exchange Act 2006 Act 723
 Payment System and Services Act, 2019 Act 987
 Insolvency Act, 2006 Act 724
 Internal Audit Agency Act 2003, Act 658
 Narcotics (Control, Enforcement And Sanctions Law) 1992,
PNDC Law 236
 Power Of Attorney Act 1998 Act 549
 Public Procurement Act 2003, Act 663
 Venture Capital Trust Fund Act 2004, Act 680

Regulation of Financial Institutions

The laws of the country classify financial institutions as follows:

 Insurance Companies
 Investment Banks and Other Capital Market Institutions
 Non-bank financial institutions
 Deposit Taking Financial institutions including specialized Deposit Taking Institutions and
Banks
Insurance companies

Insurance Companies are companies that provide protection under an insurance policy from
financial loss arising from the occurrence of identified hazards in the future in consideration of
payment of a premium or a series of premiums by the proposer of the insurance policy.
Insurance companies are now classified under insurance laws into General Insurance
companies that deal with hazards to property and Life Assurance Companies that deal with
hazards to the life of a person. In Ghana, insurance activity is regulated by the National
Insurance Commission, established under the legislation, Insurance Act of Ghana, 2006 Act
724.

Investment Banks and Other Capital Market Institutions

The main regulator of the capital market is the Securities and Exchange Commission (SEC). it
also regulates the Ghana Stock Exchange (GSE) and the Ghana Alternative Market (GAX).
Other sector specific regulators may also play a key role when an issuer of securities is a
regulated entity. For example, where an equity issuance results in a person acquiring more than
10% of the shares of an entity, approval needs to be sought from the Bank of Ghana in the case
of a non-bank financial institution, deposit taker or bank or from the NIC in the case of an
insurance company.

Key legislation and rules applicable to listing and trading in Ghana are:

 Securities Industry Act 2016 Act 929

 SEC Regulations 2003 (LI 1728)
 SEC Compliance Manual for Brokers, Dealers, Investment Advisors and Representatives
 GSE Rule Book issued by GSE which contains:
o The listing rules
o The dealing membership rules
o The Trading and Settlement rules for the GSE
 GAX Listing rules issued by GSE
 Central Securities Depository Rules and Operational Procedures.

Institutions Regulated by Bank of Ghana

Bank of Ghana regulates the operations of both non-bank financial institutions, specialized
deposit taking financial institutions and banks.

Non-bank Financial Institutions

Non-bank financial institution are regulated under the Non-bank Financial Institutions8 Act 2008,
Act 774. The Act defines non-bank financial institutions activity as including leasing operations,
money lending, money transfer, mortgage financing, non-deposit-taking microfinance services,
credit union operations and any other services or operations that Bank of Ghana may by notice
designate as such9. Bank of Ghana issues directives to provide guidelines on the application of
various regulatory matters specified in the Act10. Other institutions now recognized as non-bank
financial institutions are acceptances houses, building societies and discount houses.

Banks and Specialized Deposit Taking Financial Institutions

8
2008, Act 774
9
Ibid, Sch 1, S. 2
10
NBFI Act
Banks and specialized deposit taking financial institutions are primarily engaged in deposit-
taking business which the BSTDI Act defines broadly to include taking money on deposit and
making loans or other advances of money. Specialized deposit-taking institutions include
Savings and Loans Companies, deposit-taking microfinance companies, rural banks and
finance companies

Regulation of Banks, Specialized Deposit-taking Financial Institutions and Non-bank

Financial Institutions

Bank of Ghana as a central bank regulates the operations of banks, specialized deposit-taking
financial institutions and non-bank financial institutions through the following primary legislation:

1. The Bank of Ghana Act 2002, Act 612, the empowering legislation
2. Payment Systems Act, 2003, Act 662
3. The Non-bank financial institutions Act, 2008 Act 774 for non-bank non-deposit taking
financial institutions
4. Credit Reporting Act 2007, Act 726
5. Foreign Exchange Act 2006 Act 723
6. Banks and Specialized Deposit-Taking Institutions Act 2017 Act 930
7. Depositors Insurance Act 2017, Act 931
The organ for regulation of these institutions in the Banking Services Division (BSD) of the
Bank, which issues on the basis of the above legislation, regulations, notices and directives11 to
the respective institutions regarding various aspects of banking operations.
Other Regulatory Authorities
Other key regulatory authorities are the Financial Intelligence Center, Economic and Organized
Crime Office (EOCO) and the Data Protection Center. The enabling legislation for the above
institutions are:
1. Anti-Money Laundering Act 2008 Act 749
2. Anti-terrorism Act 2008 Act 762 and as amended in 2014, by Act 875
3. EOCO Act 2010 Act 804
4. Data Protection Act 2010 Act 843

11
S. 92 BSTDI Act