1.1 BACKGROUND OF THE STUDY
The word offshore is used to describe business carried out between foreigners in foreign-denominated currency and operates from a tax haven (Hammett, 2001:203). This basically implies that an offshore bank has to be foreign or at least foreign in nature or operation. This means that, like the several offshore banks in Switzerland, they do not necessary have to be in a foreign land (or an island) but necessary has to act as if (Ganson, 2007). This may include the operations of the local offshore bank in foreign currency; being free from local banks’ constrictions - Less restrictive legal regulation-; being a tax haven for investors; total bank secrecy -or bank private- (which is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise), just to mention a few.
This is quite a refreshing piece of banking. As people who are being pursued just for political reasons can get a breather with a place to bank in total secrecy without being subjected to persecutions [as was in the case of the Nazi regime against bank accounts of Jews and other “enemies of the German state” held in Switzerland (McCreery, 2007)]. Because of greater privacy with offshore banking, people with special needs that are outside the general retail banking’s scope are catered for through private banking (Casu et al, 2006) that are offered by offshore banks, the offshore banks on the other hand has a capacity to attract large foreign deposits which are non-inflationary by in practice as they could be sterilized (Lipsey and Chrystal, 2005) and can be accessed by locals to expand the economy of the bank’s home country as it happens elsewhere (e.g. Cayman Islands, San Marino and Switzerland). This makes it indeed refreshing.
In view of this, Ghana in the wake of pursuing its long cherished dream, quietly took its first major steps towards joining this shadowy fraternity. Just before parliament broke for its spring recess in 2007, it passed an amendment to the Banking Act -Banking (Amendment) Act, 2007 Act 738. The aim of this amended Act is to amend the Banking Act, 2004 (Act 673) ‘to facilitate the establishment of an International Financial Services Centre that seeks to attract foreign direct investment, income from license fees payable in foreign currencies, create employment enhance local skills and knowledge, strengthen the financial sector through expansion in the use of investment banking instruments and to provide for related matters’ [the banking (amendment) act, 2007. Date of assent: l8th June, 2007]. Under this amended Act (section 35), it defines the various categories of banks under; * A General banking business -“general banking business” means Class l and Class II banking business;“General Banking License” means a license authorizing the holder to transact Class I and Class II banking business in and from within Ghana. * A Class I banking business - means banking business other than Class II banking business * A Class II Bank -means banking business or investment banking business conducted in currencies other than the Ghanaian currency except to the extent permitted by the Bank of Ghana for trading on the foreign exchange market of Ghana and investment in money market instruments; This however means, offshore banks should apply for Class II Banking License in order to operate in Ghana or the General Banking License as Barclays Bank has done so as to do both Class I and Class II business.
According to McCreery, (2007), the then President Agyekum Kufuor did launch Ghana's landmark offshore banking in September 7, 2007 with Barclays Bank [which is one of the best global private banks in the world, according to Euromoney (2005) January] (Casu et al, 2006:59) as a partner. The launch of this giant leap generated mixed feelings within the financial sector,...
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