Lecturers: Dr. Monica Lambon-Quayefio Dr. Nkechi S. Owoo Dr. - - PowerPoint PPT Presentation

College of Education School of Continuing and Distance Education

2014/2015 – 2016/2017

Lecturers: Dr. Monica Lambon-Quayefio

• Dr. Nkechi S. Owoo
• Dr. William Bekoe

Session Overview

• This session focuses on the financial system which is

crucial in the study of macroeconomics. Specific areas to be covered in this session include; the hierarchical structure of the financial systems as well as the role of the central and commercial banks in an economy.

• Goals and Objectives
• At the end of the session, the student will
• Be able to distinguish between central bank and

commercial bank.

• Be able describe the functions of commercial bank.
• Be able to describe the functions of central bank.

Slide 2

The Central Bank

• The central bank is the head of all banking institutions

in in a country.

• Article 183 (1) of Ghana’s Constitution establishes the

Bank of Ghana stating:

• “The Bank of Ghana shall be the Central Bank of Ghana

and shall be the only authority to issue the currency of Ghana.”

• To maintain stability in the general level of prices.
• Support the general economic policy of the Government and

promote economic growth and effective and efficient operation of banking and credit systems in the country, independent of instructions from the Government or any other authority.

Slide 3

Structure of the financial system

Slide 4

National Insurance Commission Securities and Exchange Commission Bank of Ghana National Pensions Regulatory Authority Deposit Taking Institutions Non-Deposit Taking Institutions Universal Banks Rural/Comm Banks Savings & Loans Com. Micro Finance Institutions. Finance Houses Leasing Companies Micro Finance Institutions Forex Bureaux Credit Bureaux SSNIT Occupational pension scheme Private pension scheme Insurance Companies Insurance Brokers Re-Insurance Companies Stock Exchange Brokerage Firms Investment Management Companies

Functions of the Central Bank

• The central bank is established to perform the

following key functions:

• 1. Formulate and implement monetary policy aimed at

achieving the objectives of the Bank;

• 2. Promote by monetary measures the stabilization of

the value of the currency within and outside Ghana;

• 3. Institute measures which are likely to have a

favourable effect on the balance of payments, the state

• f

public finances and the general development of the national economy;

Slide 5

Functions of the central bank cont’d…

• 4. Regulate, supervise and direct the banking and credit

system and ensure the smooth operation of the financial sector;

• 5. Promote, regulate and supervise payment and

settlement systems;

• 6. Issue and redeem the currency notes and coins;
• 7. Ensure effective maintenance and management of

Ghana's external financial services;

Slide 6

Commercial Bank

• A bank is commercial if it provides financial services ,

including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit to the public.

• Unlike the central bank, the commercial bank deals directly

with the public while the central bank regulates the commercial banks.

Slide 7

Functions of the commercial bank

• 1. Taking deposits from their customers and issuing current or

checking accounts to individuals and businesses 2. Extending loans to individuals and businesses. 3. Cashing cheques. 4. Facilitating money transactions such as wire transfers and cashier's checks. 5. Issuing credit cards, ATM cards, and debit cards. 6. Storing valuables, particularly in a safe deposit box.

• 7. Consumer & commercial financial advisory services.
• 8. Pension & retirement planning.

Slide 8