Government Partly Involved In The Collapse Of Banks Due To Non-Payment Of Contractors

The Second Deputy Speaker of Parliament, Alban Bagbin says government’s inability to pay contractors is to blame for the collapse of seven indigenous banks in the country.

According to him, had the government settled its debt, the contractors would have been able to pay back huge loans they acquired from the banks which would have kept them solvent.

“These banks are collapsing under bad portfolios because government indulged in huge infrastructure projects, gave these projects to contractors, the contractors had to go to the banks for loans to execute the projects and government is failing to pay the money to them and so the contractors cannot repay the loans that they have contracted with the interests.

"And so the banks are holding huge bad portfolios and so such things affect the minimum capital of the banks,” he told Joy News Elton Brobbey.

The Central Bank earlier this month revoked licenses of five banks – The Royal Bank, Sovereign Bank, uniBank, Beige Bank and Construction Bank - and merged them to form The Consolidated Bank saying the banks had become insolvent.

Prior to this move, UT Bank and Capital Bank had already been taken over by GCB Bank for similar reasons.

Mr Bagbin who is also MP for Nadoli Kaleo also believes the ¢400 million new capital requirement by the Bank of Ghana is another reason the indigenous banks could not stand.

He finds the new amount outrageous and would only give an advantage to foreign banks who already have the strength.

In his view, the Ghanaian economy is small and “we will need small to medium scale banks to be able to mop up the liquidity. We don’t have a huge economy and so to try to raise the minimum capital from ¢120 million to ¢400 million is to give a policy that will be creating mega banks.”

Related: Banks collapse: BoG sets up special office to probe personnel

Since Ghanaians do not have the kind of money the banks require, the new capital requirement, he believes will open up the indigenous banking space to what he refers to as “foreign capture.”

He added that “it means that we are asking the bankers to go outside Ghana to mobilize the minimum capital, and therefore foreigners will come and invest in our banks, take control of our banks and when your banking sector is captured by foreigners they control your economy.”

Related: Bank collapse: BoG to begin civil action against offenders

In a response to whether or not the directors and shareholders of the collapsed banks should not take the blame, since their actions or inactions could have resulted in their insolvency, Mr Bagbin said he is yet to put a finger to any criminality by any of them and that the earlier issues he raised are paramount.

The aspiring presidential candidate said the BoG should not be left out of the mess.

He believes the Central Bank could have prevented the collapse had they taken their supervisory role seriously and adhered to the laws.