The former Bank of Ghana BoG Deputy Governor Dr. Johnson Asiama has urged the government to reassess the banking sector.

Meanwhile, the current state of Ghana’s banking sector and the broader economy highlights the need for reassessment and reform, especially considering past decisions that have significantly impacted local ownership in various sectors.

Dr. Johnson Asiama emphasized the role of foreign dominance in the economy and its implications for Ghana’s currency, the cedi. Dr. Asiama underscored the importance of reevaluating previous actions and looking into arbitration as a means of addressing past mistakes.

Dr. Asiama began by acknowledging the need for thorough reassessments of previous decisions. Dr. Asiama pointed out that certain actions were taken based on reassessments made at the time. He believes that examining how thorough these reassessments were, is crucial for understanding the basis of these decisions.

Dr. Asiama emphasized the importance of evaluating the process of the official administrator and how the receivership came into being, particularly under the law passed in 2016 by then-President John Mahama.

“…I’m saying certain reassessments were made for some of them based upon which the decision was reached, and actions taken. So, it’s okay to want to look at how thorough those [decisions] were.”
Dr. Johnson Asiama the former Deputy Governor Bank of Ghana BoG

Dr. Asiama referenced the law passed by President Mahama in 2016, stating that the former president has observed how the law has been applied over time. This sets the stage for a deeper analysis of how decisions have been made in the banking sector. Moreover, Dr. Asiama identified the dominance of foreigners in Ghana’s economy.

While he clarified that foreign participation is not inherently bad, the extent of their dominance poses challenges for the local currency, the cedi.

“…One fundamental problem we have as a country is that, the economy is dominated by foreigners. Now that in itself is not a bad thing, it’s okay to have foreigners in your economy. But when they dominate, it has implications for your local currency.”
Dr. Johnson Asiama the former Deputy Governor Bank of Ghana BoG

Dr. Asiama argued that unless this is addressed, the currency will continue to weaken. He explained that President Mahama’s calls to bring closure to past events are rooted in the desire to tackle this issue, particularly in the banking sector where foreign ownership has surged.

Impact on the Banking Sector

Dr. Asiama highlighted the significant decline in local ownership within the banking industry. In 2023, he noted that 90% of the total profits made in the banking sector accrued to foreign ownership. This, he argued has serious implications for the cedi.

“.. local ownership in the banking industry has gone down significantly. In 2023, out of the total profits that were made in the banking sector, 90% accrue to foreign ownership. 90%. And that has implications for your Cedi.”
Dr. Johnson Asiama the former Deputy Governor Bank of Ghana BoG

Dr. Asiama explained that two of the three main sectors of the economy, industry, and services, are now dominated by foreign ownership. This dominance in key sectors adds pressure on the cedi, and Dr. Asiama believes that resetting the banking sector and the broader economy is essential for relieving this pressure.

The Role of Arbitration and Future Reforms

Dr. Asiama advocated for the use of arbitration as a means of reexamining past decisions. He explained that the law provides for arbitration, which could lead to the reinstatement of banks that may have been wrongfully collapsed. Dr. Asiama emphasized that the arbitration process would allow for a thorough review of the decisions made during the banking crisis.

“So that’s a window to have a relook into the issues. If the arbitration center comes out with recommendations that say, no bank A probably something went wrong, So maybe allow them to go back into the industry, and give them a new license. That will also be a cop decision, and then it can be implemented.”

Dr. Asiama also touched on the criteria used to determine which banks were saved during the banking crisis. He believes it is essential to understand the basis for these decisions and to revise the law if necessary. He stressed that this process is critical to preventing a recurrence of similar issues in the future.

“…Remember when it comes to the local bank, some of them were saved, Some were not saved. What kind of criteria was used? … it’s just proper we get to understand what it is and take the opportunity to revise the law if we have to.”
Dr. Johnson Asiama the former Deputy Governor Bank of Ghana BoG

Dr. Asiama’s analysis presents a compelling case for reassessing the banking sector and the broader economy in Ghana. Dr. Asiama’s emphasis on the implications of foreign dominance, the need for arbitration, and the potential for future reforms highlights the importance of addressing these issues to ensure long-term economic stability. By revisiting past decisions and implementing necessary changes, Dr. Asiama believes that Ghana can create a more resilient economy, reduce pressure on the cedi, and restore local ownership in critical sectors.