‘We need clear strategy to restore confidence in banks’

The Member of Parliament for Bolga Central, Mr Isaac Adongo, has bemoaned the absence of a clear and convincing strategy from the Bank of Ghana (BoG) and the government on how to restore confidence in the banking sector after the collapse of seven banks in a spate of 12 months.

He said the recent collapse of the seven local banks had done a huge damage to the confidence in the sector and just the mere assurance that customers' deposits were safe was not enough to reverse the trend.

As a result, he has impressed upon the central bank and the government to come out with clear policies and guidelines on how they intend to minimise the impact of the current turmoil in the sector to help bolster the confidence of customers in banks and in particular save the indigenous banks from being tagged as unsafe to bank with.

Mr Adongo, who is a chartered accountant and financial analyst, was speaking at a public forum on the theme: ‘Banking crisis: Role played by stakeholders and directors.’

It was organised by the Public Analysis and Monitoring Centre (PAMC), to provide a platform for experts to deliberate on the roles of the key actors in the collapse of the seven banks over the last 12 months.

He said as part of efforts to restore confidence, the government must announce an extension of the deadline for recapitalisation for local banks.

He explained that the extension of the December 2018 deadline was needed to ensure that more local banks did not collapse in their attempt to recapitalise to the GH¢400 million by December this year.

He said unlike majority of the foreign-owned banks that had enough funds to be able to recapitalise within a short period of time, local banks and their shareholders were constrained by a myriad of challenges, including government indebtedness to the sector.

As a result, he said, the central bank needed to treat local banks separately in its demand for the minimum capital of banks to be raised from the GH¢120 million to GH¢400 million by December this year.

“This will calm the industry and restore confidence,” he stated.

He also advised Ghanaians to have faith in the indigenous banks, explaining that their management was well-placed to address the challenges facing them and emerge victorious.

Stimulus package

The Legislator also advised the government that instead of waiting for local banks to collapse and doll out over GH¢8 billion to bury them, it should rather put that money into a stimulus fund at the BoG.

“The government will then make their policy intention to them. Tell them if two or three of you merge and we do our valuation and you are strong, we will transfer part of the stimulus fund into the Financial Investment Trust which is a subsidiary of BoG to participate in the shareholding of the merged bank,” he explained.

“Let the BoG run the bank for three years, sell its shares back to the shareholders and go back to do its regulation job,” he added.

He said this option would have given the country more value for money and would have saved jobs as well.

“If your aim is to merge banks then you create an enabling environment for them and when they are going through difficulties, you intervene to help them out,” he stated.

He also pointed out that he did not understand how a government that owed the banking sector over GH¢5.7 billion was rather willing to spend GH¢8 billion to clean up the financial system when the payment of its debt to some of the banks could have saved them from collapsing.

Imminent collapse of financial system

Mr Adongo indicated that there was an imminent collapse of the country’s financial system and the government therefore had to do something immediately to reverse the situation.

“This is not just the banks but the entire financial system and this must be reversed immediately,” he noted.

“If you want to clean a financial system you don’t bring a whole industry to a standstill in order to clean the system,” he added. — GB