Bank Reforms Were Necessary Step To Protect Financial Sector -BoG

The Bank of Ghana’s (BoG) decision to revoke the licenses of UT Bank and Capital Bank in 2017 was a drastic measure that sent shockwaves through Ghana’s financial sector.

According to Dr. Ernest Addison, Governor of the BoG, this move was not taken lightly, but was rather a necessary step to protect the financial sector and comply with strict requirements from the International Monetary Fund (IMF).

The IMF had already recommended reforms, including the revocation of licenses, as a condition for disbursing funds to Ghana.

Dr. Addison revealed that the BoG was faced with no option but to take tough measures, citing the IMF’s “prior actions” that had to be completed before any further discussions or disbursements could take place.

Dr. Addison has consistently pointed to poor corporate governance as a major factor.

In 2017, he stated that the lack of good corporate governance had contributed significantly to the collapse of the two banks.

This sentiment was echoed in his recent comments, where he emphasized the importance of corporate governance in promoting a sound financial system.

The revocation of licenses was not an isolated incident.

In 2018, the BoG revoked the licenses of five more banks, including uniBank, The Royal Bank, The Beige Bank, Sovereign Bank, and The Construction Bank. These banks were found to have engaged in various forms of misconduct, including under-provisioning for loans, overestimation of investments, and breaches of regulatory requirements.

The BoG’s tough reforms have had a lasting impact on Ghana’s financial sector.

According to Dr. Addison, the measures taken have strengthened the banks to withstand external shocks, such as those associated with the COVID-19 pandemic and the Russian-Ukraine war.