Continue process to fortify banking sector -Nana to Central Bank

President Nana Addo Dankwa Akufo-Addo has urged the Bank of Ghana (BoG) to remain committed to the process of strengthening the weak banking system in the country, and to address the challenges confronting the sector.

According to him, a weak banking system undermines growth, and, on that basis, the current weaknesses in the banking sector needed to be addressed forcefully to minimise any adverse financial consequences to unsuspecting savers, and their spill-over effects on the economy.

The President explained that the need to entrench reputation and credibility in the financial system was crucial, whilst stating his awareness of the implementation of a road-map for addressing banking sector weaknesses.

The President’s advice to the Central Bank to remain resolute in its quest to revive the banking sector comes at a time when the Bank of Ghana had revoked the licenses of two renowned banks, UT Bank and Capital Bank.

Recently, the BoG took over management of these two banks, with reasons that the banks were deeply insolvent, meaning that their liabilities exceeded their assets, putting them in a position not to be able to meet their obligations as and when they fell due.

Despite repeated agreements between the Bank of Ghana, UT Bank and Capital Bank to implement an action plan to address these significant shortfalls, the owners and managers of the two banks were unable to increase the capital of the banks to address the insolvency.

Consequently, to protect customers, the BOG then decided to revoke the licenses of UT Bank and Capital Bank under a Purchase and Assumption transaction.

Interestingly, the Vice President, Dr Mahamudu Bawumia, had, in 2016, during the campaigning season, announced that due to the bad economic management of the previous Mahama government, some banks were on the verge of collapse.

As usual of the National Democratic Congress’ communicators, Dr Bawumia was baptised with ‘insults,’ whilst some called him “Prophet of Doom.”

However, barely a year after his revelation, two banks have collapsed whilst some more are expected to follow unless Heaven comes down.

The BoG has since given the assurance that it would be steadfast in ensuring that the country got a robust banking sector.

To this, the President, giving his address at the 60th Anniversary celebration of the BoG in Accra on Friday, August 18, 2017, also urged the bank to walk the talk.

“The need to entrench reputation and credibility in the financial system is crucial. A weak banking system undermines growth, and, on this basis, the current weaknesses in our banking sector need to be addressed forcefully to minimise any adverse financial consequences to unsuspecting savers, and their spill-over effects on the economy.

“My understanding is that a road-map 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. 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 praiseworthy regulator. I am confident that you have the support of the nation,” the President remarked.

The, President, speaking on the theme, “Celebrating 60 years of Central Banking,” carpe diem to ask what should be the appropriate partnership between the Central Bank and his administration as he pursued its change agenda.

“I am a lawyer in the company of eminent central bankers and economists. I can only acknowledge the importance of your work in the overall performance of the economy, without wandering too much into how you do it. Some of us are intrigued by the “art and science of central banking”, which connotes some magical incantations about its nature.

“This is an important occasion, the 60th Anniversary, and yet, what I bring you is not a gift, rather, it is a simple question. A question that you, as central bankers, must have been thinking about all this while: “What should be the appropriate partnership between the Central Bank and the government in our change agenda for growth and job creation?” Let me look back a bit in history before I return to this question,” he explained.

By Maxwell Ofori