Measures have been put in place to identify struggling banks – BoG Governor

Bank of Ghana’s (BoG) Governor, Dr. Ernest Addison, has said strict measures have been put in place to rapidly detect signs of distress exhibited by financial institutions, to immediately step in and protect the funds of depositors.

According to the Governor, the measures include tightening of the bank’s supervisory role to stop the financial indiscipline that led to the collapse of some financial institutions as well as nine local banks.

Whiles Dr. Addison was speaking at the 2020 GIMPA Law School webinar Conference on the Banking and Financial Sector Crisis, he said the central bank has picked lessons from previous happenings, hence their decision to have early warning signs in place to prevent another financial crisis.

“The supervision of banks has been strengthened with systems and structures to identify problems and proactively mitigate to manage vulnerabilities and threats to stability. Going forward, the financial sector will require constant regulatory and policy attention to mitigate risks.”

The Governor, touching on the impact COVID-19 has had on the banking sector, said: “The economic impact of the pandemic may result in higher non-performing loans and capital erosion of banks.”

At the same session, the Director-General of the Securities and Exchange Commission (SEC), Rev. Daniel Ogbarmey Tetteh, who was the guest speaker at the Webinar, revealed that his outfit is working on bailout packages with the Finance Ministry for some 22 Fund Managers whose customers have their monies locked up.

“Liquidation orders for 22 firms have been secured, and the Ministry of Finance has indicated the government’s intention to support the process with a bailout package. It is noteworthy that the resolution pathway we have used differs from that which was used by the Bank of Ghana mainly because of differences in the powers granted by our respective enabling acts. It is our firm expectation that we will be able to implement the bailout package in the coming weeks, to bring respite to affected investors and help galvanize the confidence of asset owners and liquidity providers and the financial system.”

What led to the financial sector clean-up?

In August 2017, the Bank of Ghana (BoG) gave GCB Bank Ltd the green light to acquire two local banks, UT and Capital banks due to severe impairment of their working capital.

As though that was not enough, the Bank of Ghana later in August 2018, merged five other local banks into the Consolidated Bank Ghana Limited (CBG).

Later in May 2019, a total of 347 microfinance companies also had their licenses revoked by the Bank of Ghana.

In August 2019, the BoG 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.