JOURNAL SUMMARY

The economies of various countries depen ds on the financial sector. When the capital
market is not big enough, then banks become the center of the financial sectors.
Therefore, bank is required to be survived and delier good performance continuously
that fnally become everyone concern. the great depression of the 1940s worsened by
bank failures has increase the attention to bank performance e to the higher level than
before.

Due to the importance of banks and the sensitivity of their performance to the
economy of countries, various regulators put in place regulations to ensure that banks
are well placed to guarantee continuity at least for the foreseeable future.

Th central bank of Ghana required all banks to recapitalize after the oil has been
discovered. In this new regulation, foreign bank is required to recapitalize GHS
60000000, whil local banks in Ghana only GHS 25000000. Tthis journal wants to
know the reason behind the differences of the regulation.Is it due to different
performance of both banks?

This journal use CAMEL approach to measure the bank performance to analyze data
from 2005-2010. Aburime (2008) says bank profitability depend on their forecast,
risk monitoring, and the bility to cover losses that com from taking the risk. Even
though risk is something tht should be avoid by manage their liquidity, Kamau (2009)
argues that that risk should be taken as the opportunity cost for generating high return
whe banks hold high liquidity.

Athanasoglou et al, (2006) said that the performance of banks determined by the
market structure, the market power that comes as a result of the concentration of the
market, the bank size ( argueable). He also said that it influenced by the result from
the decisions and policies of management and industrial structural factors.

This jounal use CAMEL since it is BCBS and IMF. This approach covers capital
adequacy, asset quality, mefficiency, earnings performance and liquidity. The data
comes from banks which mostly owned by Ghanaians and mostly owned by
foreigners from 2005 until 2010. The CAMEL approach will measure ROE, ROA,
capital adequacy, asset quality, management efficiency, earning performance,
liquidity, and bank size.
Local banks have higher ROE and ROA than foreign banks which means it has better
profitability. They also have better asset quality rather than foreign banks due to
higher averge non performing loans. And due to management efficiency was proxied
by the average ratio of interest income to total assets, local banks is better than
foreign banks. While for adequacy, foreign has better ratio than local banks due to the
regulation and access to their parent banks’ funding. Same with the earning
performance, liquidity,and bank size, foreign bank is better due to higher average net
interest margin, average deposit ratio, and average log of total assets.

In conclusion, mostly foreign banks have better performance in all aspect. Only in
profitability, local banks have higher performance than foreign banks.

REVIEW
From the data, its not contradict with the result which means the research result is
valid. But this study did not account for the recently addition to the CAMEL rating
system which is sensitivity to market.Sensitivity to markt is the factor that explores
how sensitive the bank’s earnings are to adverse developments in the market, such as
a sudden change in interest rates.

This journal also gives right result since many research also state the same thing such
as Alna et al, (2016) that using same method to same data but different year also get a
conclusion that the foreign banks are more profitable than their local counterparts
during the period under study.

Other researchers that using different method which using Generalised Least Square
technique (GLS) to estimate random effect regression model also has the findings that
revealed that foreign banks performed better than domestic banks within the period
but the difference is not substantial. Moreover, foreign banks are more capitalised
than domestic banks (Agyemang ,2015). In additional, Tetteh (2015) that said in most
cases, the foreign owned banks perform better and are more efficient than their local
counterparts resulted from his research using panel econometric technique to data
from 2003 until 2012.

Other researcher that conduct the same research but in different country has the same
result that says saying that foreign Malaysian banks are in better position than
domestic in the case of profitability (Matthews and Ismail, 2005).

From this conclusion, i know why the central bank of Ghana issued a new regulation,
since foreign banks hve higher performance, this regulation will help to protect and

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make the local banks more competitive within the industry. Since in the financial
sector of Ghana, banks is very important and that makes protect local banks become
the priority.

The suggestion of this thesis for future studies are to introduce the factors whether
internal, external, industry specific or macroeconomic factors tosupport these results.
And in measuring bank liquidity, the ratio of Net Loans to Customer & Short-term
Funding is argued as the best measure since it shows the relationship between
comparatively illiquid assets which is loans to comparatively stable funding sources
that is deposits and other short term funding (Pasiouras & Kosmidou, 2007).
However the author was rather used only ROA and ROE. Cost efficiency, credit risk
and reserve ratios could also be incorporated to ascertain the determinants of bank
profitability in Ghana.

Also the author can add periods of data so he could have drawn more valid result,
than the ones provided. Regarding the policy maker, it would be better to do more for
encouraging local banks by providing some support such as providing subsidy or
making a reduction on their taxes comparably to foreign banks.

Ilhomovich (2009) advocate that the financial market has dramatically changed over
the years. Thus, it is really in need of the bank to do thorough examination by
CAMEL Model in order to get the newest information.

REFERENCES
Gyamfi Matthew, Laryea Afoley Esther. (2012). A Financial Performance
Comparison of Foreign VS Local Banks in Ghana.

Michael Lawer Tetteh (2014). Local versus foreign bank performance: the case of
Ghana.

Samuel Erasmus Alnaa, Joseph Adongo, Matey Juabin (2016). Comparative analysis
of profitability of local and foreign banks in Ghana.

Matthews and Ismail (2006). Efficiency and Productivity Growth of Domestic and
Foreign Commercial Banks in Malaysia. Cardiff Economics Working Papers.

Douglas Afoakwah Opoku-Agyemang (2015). Factors influencing the profitability of

domestic and foreign banks in Ghana. AARHUS University

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 Kosmidou K., Pasiouras F., Tanna S. (2005). Determinants of Profitability of
Domestic UK Commercial Banks: Panel Evidence from the Period 1995-2002,
Website: http://repec.org/mmfc05/paper45.pdf (Accessed: February 26, 2017).

IMF (2011), Ghana: Financial System Stability Assessment Update IMF Country
Report No. 11/131 Washington DC. [Online] Available at:
http://www.imf.org/external/pubs/ft/scr/2011/cr11131.pdf [Accessed: February 26,
2017]

Ilhomovich, S.E. (2009), Factors Affecting the Performance of Foreign Banks in

Malaysia. Master of Science (Banking), College of Business (Finance and Banking),
University Utara Malaysia.

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