Finance Minister, Ken Ofori-Atta, in his mid-year budget review said, government has currently spent GHS21.62 billion in the cleanup of the financial sector as at 2020 first quarter.
He indicated however that the amount used as a preemptive mechanism to salvage some collapsed banks as he addressed the House on Thursday July 23 was GHC 13.6 billion.
“As at the end of first quarter 2020, a total amount of GH¢13.6 billion (3.5 percent of GDP) has been spent on the resolution of failed banks, Specialized Deposit-taking Institutions (SDIs), Micro Finance Institutions (MFIs), the establishment of the Consolidated Bank Ghana Limited (CBG), as well as the capitalization of the Ghana Amalgamated Trust(GAT)”.
Ken Ofori Atta
The decision to clean-up the sector that spiraled the collapse of some financial institutions was not a deliberate act of the government, as some have loosely suggested, the finance minister indicated.
“Let it be said that a serious government, as we are, desperate as we were to fix a broken economy as it was and fund our own programmes, as promised, and as patriotic as we are, had absolutely no thoughts, no time, no energy or the luxury to conspire with the central bank to deliberately cause the downfall of Ghanaian banks that were already in zombie state, fatally insolvent, by the time we took office. What we did was to merge those that had failed, save those that could be saved with the view to building a strong and viable financial sector with integrity. What the President did, which is unusual in banking practice, globally, was to go the extra mile to save the funds of all depositors of failed banks”.
Meanwhile, as a buffer mechanism to keep the banking sector afloat, Ken Ofori-Atta expressed government support in light of policies which have been implemented to mitigate the threat posed.
“The Bank of Ghana has stepped up to the challenge and announced various policy measures to help support the economy and financial institutions in order to cushion the adverse impact of Covid-19 on the economy. It is important to stress that this has been possible because of the responsible and competent management of both the fiscal and monetary space since 2017”.
Ken Ofori Atta
The Finance Minister expressed government’s intention in expediting process of repayment to depositors and staff of collapsed banks and financial institutions, via the Receiver, appointed by government.
The Bank of Ghana, between 2017 and 2019, revoked the licenses of nine local commercial banks and over four hundred financial institutions comprising Micro-finance, Savings and Loans as well Finance Houses, for violating various regulations guiding their operations.
This affected about 4.6 million depositors whose monies could have been lost completely had the regulators not taken the action.
In August 2017, the Bank of Ghana (BoG) approved Ghana Commercial Bank’s acquisition of two local banks, UT and Capital bank due to severe weakening of their capital.
Later in August 2018, the Bank of Ghana consolidated five other local banks into the Consolidated Bank Ghana Limited.
The Bank of Ghana later in August 2019 again revoked the licences of twenty-three (23) insolvent savings and loans companies and finance houses, whiles the Securities and Exchange Commission revoked the licenses of over 50 Fund Management Companies.
