Total assets of the Banking Sector have grown by 54.9 per cent over the last three years, 2nd Deputy Governor of the Bank of Ghana, Mrs. Elsie Addo Awadzi has said.
She said as at August 2017 when the financial clean-up started, total assets of the industry with 36 banks stood at GH¢89.1 billion but have now increased to GHc138 billion with just 23 banks as at the end of second quarter of 2020.
Mrs Awadzi was speaking on a webinar which was organized by the Ghana Association of Restructuring and Insolvency Advisors (GARIA) on the Corporate Insolvency and Restructuring Act, 2020 (Act 1015).
“Bank of Ghana’s latest financial soundness indicators show that while assets held by the banking sector in August 2017 when the reforms started stood at GH¢89.1 billion for a sector that had 36 banks, the total assets of the industry that now has 23 banks have increased significantly to GH¢138 billion at the end of the second quarter of 2020, with significant improvements in asset quality”.
Mrs Awadzi also further threw more light on the recent clean-up in the banking industry which resulted in the revocation of licenses of some 420 financial institutions across the country. According to the Deputy BOG Governor, the clean-up became very necessary to prevent the financial sector from collapse.
“If the recent banking sector clean-up is anything to go by, the orderly exit of non-viable institutions from the market place creates room for viable ones to thrive and support the economy better. The clean-up exercise, which saw the revocation of licenses of 420 banks, specialized deposit taking institutions, and non-bank financial institutions, was necessary to save the financial system from total collapse given the level of interconnectedness in the system.
“Of the 420 institutions closed, 379 (9 banks, 23 savings and loans and 347 microfinance companies) are currently being resolved under the special resolution regime established under section 123 of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), while 41 NBFIs (39 microcredit institutions, one leasing company, and one remittance company) which were regulated under the NBFI Act of 2008 (Act 774) and are being resolved through liquidation under the now-repealed Bodies Corporate (Official Liquidations) Act, 1963 (Act 180) and Act 1015, following Bank of Ghana’s appointment of the Registrar of Companies as Official Liquidator pursuant to section 7 of the NBFI Act.”
She further noted that in 2019 alone, banks had to write off bad loans worth GH¢1.6 billion which they had fully provisioned for in line with accounting and regulatory requirements.
She said Act 1015 holds the promise of helping to deal with the NPL overhang, through effective debt workouts and other modes of restructuring to help creditors recover on their claims while giving debtors a chance to reorganize their economic and financial affairs.
