Fix weaknesses in banking sector – Nana Addo to BoG

President Nana Akufo-Addo has charged the Bank of Ghana to address the weaknesses in the banking sector.

According to him, such moves will prevent any adverse spillover effect on the economy.

Speaking at the 60^th anniversary lecture organized by the Bank of Ghana in Accra on Friday, Akufo-Addo said: “a weak banking system undermines growth and on and this basis, the current weakness in our banking sector needs to addressed forcefully to minimize any adverse financial consequences to unsuspecting savers and their spillover effects on the economy.”

On recent developments in the banking sector which led to the takeover of UT bank and Capital bank by the GCB bank, the president commended the central bank for the swift intervention.

According to him, the swift and professional manner in which the Bank of Ghana dealt with the issue has further entrenched the reputation and credibility of the central bank.

“Your most recent measures in intervening decisively over the matters of UT bank and Capital bank demonstrate your preparedness to act in a manner worthy of a responsible central bank; of a praise worthy regulator. I'm confident that you have the support of the nation,” he added.

“My understanding is that the roadmap for addressing banking sector weaknesses is being implemented. I urge you as the nation's central bank to remain committed to the process and to address the challenges confronting the banking sector. This will not only guarantee financial stability but also promote greater confidence in that sector” Akufo-Addo added.

GCB bank was on Monday given the green light to take UT and capital bank  which according to the Bank of Ghana had “severe impairment of their capital.”

BoG further revoked the licenses while the Ghana Stock Exchange (GSE) also suspended the listing status of UT Bank.

Researchers predicted Ghanaian banking crises

A stress test of Ghanaian banks conducted by two researchers, Anthony Q. Q. Aboagye and Effa Ahenkora, had predicted that three Ghanaian banks would collapse under severe stress .

In a study which assessed the capacity of Ghanaian banks to absorb large but plausible losses resulting from concentration of individual bank loan portfolios in key sectors of the Ghanaian economy, the researchers found that capital adequacy ratios of many banks would have been negatively impacted, some to the point of becoming insolvent.

Stress tests provide a simulation of plausible negative scenarios to determine the ability of a financial institution to deal with an economic crisis or other types of risks that exist in an economy.

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By: Godwin Akweiteh Allotey/citifmonline.com/Ghana
Follow @AlloteyGodwin