The emphasis on ensuring good and stronger corporate governance practices within the Banking industry by the Bank of Ghana, following the reform and clean-up of the sector, has gone a long way to boost its resilience to shocks, even amidst the global crises.
Elsie Addo Awadzi, the Second Deputy Governor of the Bank of Ghana made these comments while speaking at the UPSA Quarterly Banking Roundtable, organized under the theme ‘Toxic Assets, Insolvency and Liability of Banks’.
In her submission, the Second Deputy Governor intimated that the Banking sector is safe, sound and has the required absorbers to withstand the expected shocks associated with the resurgence of the coronavirus pandemic, adding that the reforms undertaken earlier on in the sector has brought stability to the industry
“This is due to the BoG’s new emphasis on stronger corporate governance within the Banking sector.
“We are confident about the sector’s resilience to withstand this challenge.”
Touching on the issue of the extent of liquidity in the Banking sector to remain solvent amid the coronavirus pandemic, Elsie Addo Awadzi enunciated that following initiatives implemented by the Central Bank, the sector remains more resilient, especially compared to the pre-reform era.
She further emphasized that after the financial sector reform, her establishment has been very transparent and more stringent with its corporate governance directives making the Banking sector more robust and proven to withstand shocks even in the face of the COVID-19 pandemic and its associated economic hardships.
Recently, the Bank of Ghana issued a draft corporate governance directive as well as risk management guidelines for Rural and Community Banks to be adhered to in their operations.
Commenting on the level of toxic assets in the Banking sector and Non-Performing Loans, Elsie Addo Awadzi mentioned that quality of banks’ assets have improved considerably compared to period prior to the financial sector cleanup.
“Key management personnel that are approved by the BoG do a better job at risk management, hence, leading to an improvement in asset quality
“The non-performing loan ratio of banks has trended downwards over the last two and half years, and there has been a consistent improvement in the asset quality of banks, although there are still some non-performing assets,”
Elsie Addo Awadzi
The BoG Second Deputy Governor finally revealed that her outfit conducts monthly stress tests on the Banking industry.
“As of November 2020, the banks were considered to be resilient under all stress tests conducted, even in the face of the pandemic”.
President of the Ghana Association of Restructuring and Insolvency Advisors, Felix Addo, sharing his thoughts on the topical issue asserted that the BoG took some immediate steps in the advent of Covid-19 which made banking systems even stronger.
For instance, the Bank of Ghana issued a notice requiring banks and Specialised Deposit-Taking Institutions (SDIs) to desist from declaring or paying dividends and from making other distributions to shareholders for the financial years 2019 and 2020. Also, the capital adequacy buffer was reduced from 13% to 11.5% percent.
All these measures have enabled the Banking industry to remain robust and able to withstand the stress posed by the pandemic, he remarked.
