Kudos BoG, but which is next?

There is an uneasy calm among customers of Capital Bank and UT Bank following the decision of the Bank of Ghana (BoG) to revoke the licences of these institutions over poor financial performances and undercapitalisation in the banking industry.

The two banks were heavily deficient in both capital and liquidity, exposing their depositors to very high risks which could also affect the stability of the entire financial services industry.

By revoking their licences, these two institutions cease to operate as the BoG believes their continuous stay in the industry can endanger the industry as a whole.

Customers of the two banks, however, have no cause to worry because GCB Bank has assumed control over them and appropriate steps have been taken to ensure that depositors’ funds are very safe.

The GRAPHIC BUSINESS commends the BoG for this bold and necessary intervention. This is because the intermediation role of the banks cannot be overemphasised, thus the central bank must ensure that any risk associated with the performance of this role is nipped in the bud to protect the stability and soundness of the financial system.

Confidence in the banking industry by depositors and investors is imperative as they always need to be assured of the security of their investments and deposits. Any action or inaction, therefore, that seeks to deepen public confidence in the banking sector should be welcomed.

Thus, we believe the timely intervention from the BoG would go a long way to prevent a loss of public confidence in the banking system which would have occurred if the two affected banks had been allowed to continue operating.

However, in future, the BoG should not wait for such an important move to be prompted by the International Monetary Fund (IMF) as the GRAPHIC BUSINESS understands this quick action from the regulator was as a result of some pressure from the IMF for the BoG to quickly deal with the situation of the affected banks before its next board meeting in Ghana.

In the light of this, the GRAPHIC BUSINESS is urging the regulator to act swiftly in dealing with the rest of the banks who may also be facing similar challenges.