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Opinion | Jan 15, 2019

How Ghana Is Becoming Morally Bankrupt

How Ghana Is Becoming Morally Bankrupt

The banking system of a country is even more important than its Government. For Governments come and go, whereas the banks stay and serve both supporters and enemies of changing governments, whatever their colour.

Because of their "permanent" status, and the never-ending need of humanity for economic support, banks assume a role in society that's almost "sacred"; certainly, sacrosanct. Everyone expects them to be honest, fair and imbued with unending integrity. Banking scandals are extremely shocking and any society whose banks fall short of the integrity expected of them is signalling clearly that it is morally bankrupt.

Of course, since banks are staffed by human beings, it is only to be expected that some will occasionally fail to rise to the high standards they have set themselves, or are required by the laws of their host government to observe.

Now, banking laws have to be among the most stringent in the world, for, of course, such laws need to be strictly enforced so that the customers of banks can rest assured that the laws will deter the staffs of banks from filching their hard-earned money.

This trust in the system that governs banking is of the utmost importance because the customer of a bank is necessarily a stranger to the staff. It is to a complete stranger that he is entrusting his whole month's earnings (usually) or the entirety of his business takings. These agents of the bank entertain no natural sympathy towards him, such as he might expect from a person known to him, such as a relative. Even then, he would have to know that the relative could be trusted with money.

Will the bank be able to give him back his money if and when he needs it? Will the bank advise him on how to invest his money wisely? Or save it for him in such a proficient manner that it will grow when it is not needed for his own purposes?

The customer is entitled to believe that the bank would not have been licensed by the financial authorities of his country to take his money from him, if they had not used their enormous resources to carry out the most thorough "due diligence" investigations into the backgrounds of the bank's owners and principal officials, before classifying them as persons worthy of being entrusted with other people's hard-earned money.

It is only with that assurance of governmental approval that the bank customer can rest his mind and rid himself of the fear that the officials whom he encounters at the bank's public counters, might short-change him or somehow contrive to cheat him.

The whole system, then, is based entirely on trust. The financial authorities of the country trust in the people to whom they issue licences to operate banks; and the operators of the banks, in turn, are obligated to make sure they employ people of impeccable probity so that the trust reposed in them by the financial authorities might not be misplaced.

It is the assumption that these trust-building measures have been complied with that makes "Johnny Public" happy that he has deposited his money in a bank, instead of hiding it under a mattress, where it can easily turn into feed for mice and cockroaches or mouldy paper that's unusable.

It is extremely sad therefore that in recent months, banks in Ghana have been featuring prominently in the news as being involved in one scandal or the other. Banks as a whole cannot simply afford to have their names associated with bad news to the extent that they have been exposed to recently. Even where the regulatory authority, the Bank of Ghana, acting on behalf of the Ministry of Finance, detects that malpractices are going on in a bank, this should ideally not reach the ears of the public but should be settled behind the scenes.

However, if the malpractices include fraud or the exercise of bad faith, then the Bank of Ghana has no option but to impose very serious punishment on the offenders. This should be done very speedily, without much public passing of the buck. Statements and counter-statements, as well as rebuttals of all sorts, must be eschewed while punishments are widely publicised, in order that others might be deterred from catching the horrendous disease of stealing from bank depositors.

It is regrettable indeed that in the past year, we have heard of so many shocking practices within the licensed banking system. What is even worse is that, despite the way the public has felt scandalised by the banking malpractices, no bankers have, so far, been punished with the sanctions of custody expected to arise from breaches of our financial services regulations.

All the regulators are required to do is to establish that the law of banking was broken. Once they do that, they should speedily take the bank officials responsible for the breaches before the courts, and allow the law to take its course. It is absurd in the extreme for officialdom to wait for ordinary members of the public to sue the banks in the courts for alleged wrongdoing. When members of the public so that, they demonstrate publicly that they have no faith in the system. This is dangerous for the economy of the country. If trust in the banking system collapses, how can the Government find money to finance its deficits in the public accounts?

The irony is that the moment the Bank of Ghana decided to bail some of the delinquent banks out by shoring up their diminished reserves, some of the defaulting banks apparently took the Bank's “generosity” for weakness and went "a-dancing", thanking God for his mercy towards them!

One bank was said to have actually allowed some of its topmost officials to "borrow" the money the Bank of Ghana had given them, to use as proof to the same Bank of Ghana, that they had adequate resources to open a new bank! And the Bank of Ghana was unable (unwilling?) to detect this and accepted such a KwakuAnanse-style financial sleight-of-hand and gave the “new” bank a licence to operate!

Another "bank" which started as a minor “savings and loans” company, or what Ghanaians would call a “sisu” financial entity, was said to have been able to convince the financial regulatory authorities that it should be licensed as a bank. Yet a few stringent checks on the lifestyles of its "owner(s)" and their associates would have revealed that they were running a veritable "Ponzi" scheme, given the number (and type) of motor vehicles they kept buying and displaying, and the mansions they dwelt in, to say nothing of their peripatetic travel schedules.

Re-floating busted financial institutions or re-branding them; amalgamating some with others while allowing others to go under: such practices are all well and good, but they do not answer one fundamental question: where were the Bank of Ghana's regulatory enforcers when the clever con-artists were carrying out their "Bernie Madoff-style" schemes whereby incredible opulence was used to entice people to throw their money away? (At one stage, Madoff had over $20 billion to play with!)

Such decisions, being largely based on the discretion of the regulatory authorities, can also open them up to accusations of favouritism, collusion or cupidity.

Fortunately, our Minister of Finance comes from a banking background. Of course, that can either be part of the solution to our banking crisis, or part of the problem.

Part of the problem? Yes --the answer is that when you are too familiar with the workings of a system, you may be tempted to minimise its failings and rationalise its shortcomings. Besides, some of the wrongdoers might be one's old colleagues. How objective can one be in assessing their role in a scandal?

The most important consideration at the moment is that no-one should dare repeat the practices that led to the recent banking disasters. The onus for that is clearly on our Minister of Finance, who has act quickly to clean the Aegean stables and bring back financial integrity to Ghana.

I wish him good luck!

Cameron Duodu
Cameron Duodu, © 2019

Martin Cameron Duodu is a United Kingdom-based Ghanaian novelist, journalist, editor and broadcaster. After publishing a novel, The Gab Boys, in 1967, Duodu went on to a career as a journalist and editorialist.

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