The method deployed by the Bank of Ghana (BoG) in the recent clean-up exercise was largely dependent on the root cause of what accounted for such banks to become insolvent, First Deputy Governor of the BoG, Dr. Maxwel Opoku-Afari has said.
Reports indicate that the BoG pumped in Ghc20 million daily to enable cheques of such banks to go through clearing, as their capital adequacy ratio was in negative and thus had to depend on life support. The capital injection was necessary as the central bank had to take pragmatic measures to ensure smooth running of the entire clearing and payment system.
Instructively, the central bank has maintained that such occurrence prior to the revocation of their operational licenses defeat the argument and sentiments expressed by the public on the failure of BoG to rather institute effective and convenient measures to bail up such banks.
Some even noted that to ensure financial inclusion in the sector and protect businesses, the central bank had no option than to give monies directly to the banks to make them somewhat liquid rather than revoking their licenses.
Answering a question based on a similar sentiment expressed by one of the participants during the Ghana Industrial Summit and Exhibition (GISE) 2019 held in Accra last week, Dr. Opoku-Afari noted that the collapsed banks had their licenses revoked because they were operating fraudulently coupled with poor risk management.
“Some institutions take depositors money and give it to related party institutions without adhering to the laid down rules. There are rules as to how you can give loans to related businesses.
But if you break those rules and then syphon monies to these related institutions, do you think that to ensure financial inclusion, the BoG should pump more money into those banks? The best thing to do is to revoke their license to prevent it from spilling over to affect other strong institutions”, he queried and explained.
Instructively, the net effect of the clean up exercise was necessary in the sense that it prevented disorderly collapse of the banking sector, the central bank maintains.
So far, out of a total Ghc10 billion spent to protect depositors funds from the collapse banks, the central bank has just managed to retrieve about Ghc849 million, representing a paltry 8.4 percent.
The gathering was aimed at supporting industrialization and export competitiveness on a sound financial ecosystem organized by the Association of Ghana Industries.