Question

QUESTION 1

a)ARB apex bank is a mini Central Bank. Discuss(not less than 300 words)

b)

A multi-faceted financial system which includes non-bank financial institutions (NBFIs), can protect

economies from financial shocks and recover from those shocks. Discuss the significance of the NonBank Financial Institutions Act, 2008 (Act 774) in the context of this statement

Answer 1

a.The ARB Apex Bank Limited is a “mini”-central bank for the Rural & Community Banks (RCBs).   The Bank was registered as a public limited liability company in January, 2000. The shareholders are the RCBs. It was granted a banking license in June, 2001 and was admitted to the Bankers Clearing House as the 19th member in August, 2001.

It had its certificate to commence business on 1st November, 2001 and commenced banking business on 2nd July, 2002. The activities and operations of the Bank are governed by the ARB Apex Bank Limited Regulations, 2006 (L. I. 1825) which came into effect on 12th December, 2006.

The Bank has 9 branch offices throughout the country, which are as follows: Accra, Kumasi, Sunyani, Bolgatanga, Takoradi, Koforidua, Hohoe, Tamale.

Function of RBX bank

• Keep accounts and maintain primary cash reserves.
• Monitor, inspect, supervise and ensure compliance.
• Lend funds.
• Handle cheque clearing activities.
• Provide specie services.
• Supply cash and receive excess cash.
• Render funds management services.
• Guarantee payment instruments.
• Provide audit and inspection services.
• Develop credit assessment procedures and monitor loans and advances.
• Provide ICT services.
• Provide training for staff and directors.
• Provide a deposit insurance scheme to protect deposits of customers.

A multi-faceted financial system that includes non-bank financial institutions can protect economies from financial shocks and enable speedy recovery when these shocks happen. NBFIs provide “multiple alternatives to transform an economy's savings into capital investment, serve as backup facilities should the primary form of intermediation fail.

However, in the absence of effective financial regulations, non-bank financial institutions can actually exacerbate the fragility of the financial system.

A multi-faceted financial system which includes non-bank financial institutions (NBFIs), can protect

economies from financial shocks and recover from those shocks.

Anonbank financial institution (NBFI) is a financial institution that does not have a full banking license and cannot accept deposits from the public. However, NBFIs do facilitate alternative financial services, such as investment (both collective and individual), risk pooling, financial consulting, brokering, money transmission, and check cashing.

NBFIs supplement banks in providing financial services to individuals and firms. They can provide competition for banks in the provision of these services. While banks may offer a set of financial services as a package deal, NBFIs unbundle these services, tailoring their services to particular groups. Additionally, individual NBFIs may specialize in a particular sector, gaining an informational advantage. By this unbundling, targeting, and specializing, NBFIs promote competition within the financial services industry.

Having a multi-faceted financial system, which includes non-bank financial institutions, can protect economies from financial shocks and recover from those shocks. NBFIs provide multiple alternatives to transform an economy's savings into capital investment, which act as backup facilities should the primary form of intermediation fail.

However, in countries that lack effective regulations, non-bank financial institutions can exacerbate the fragility of the financial system. While not all NBFIs are lightly regulated, the NBFIs that comprise the shadow banking system are. In the runup to the recent global financial crisis, institutions such as hedge funds and structured investment vehicles, were largely overlooked by regulators, who focused NBFI supervision on pension funds and insurance companies. If a large share of the financial system is in NBFIs that operate largely unsupervised by government regulators and anybody else, it can put the stability of the entire system at risk. Weaknesses in NBFI regulation can fuel a credit bubble and asset overpricing, followed by asset price collapse and loan defaults.