Business News Fri, 4 Jan 2019

Government justifies planned support for some local banks to recapitalize

Government has justified its decision to provide financial support that would help some local banks recapitalize.

This comes in the wake of concerns of double standards and bias looking at how it handled the seven collapsed banks and why it did not extend the same support to these banks.

Reasons for backing deal for local banks

According to a government source, it was forced to support this arrangement, which is private sector lead, because of the impact of allowing the banks to collapse could have on the economy.

This is because these local banks that are struggling to recapitalize may be making some significant contribution to the economy in terms of taxes and employment.

For instance, the source noted that “we were worried about the direct and indirect job loses, coming just after the collapse of the seven commercial banks.”

We are also learning that government was worried about whether the economy was ready to absorb another round of indirect jobs that might be affected if these banks are allowed to go down.

Government also considered the fact that if these banks are made to step down to savings and loans companies , how this would restrict a lot of activities that they are doing which would in turn impact negatively on their earnings, impacting again negatively on indirect jobs.

Concerns of bias, double standards by government

Government sources have also rejected claims of bias and double standards over how they handled these local banks that were struggling to meet the new minimum capital requirement.

The news about this planned financial support for these local banks has resulted in some raising serious concerns about why government allowed the other 7 banks to go down.

But government has maintained that, unlike the 7 collapsed banks, these local banks were managed and they were not insolvent, like the other financial institutions, “so it is not fair to allow them to go down, just because of a little top up to recapitalize.”

Proposed financial deal for the local banks

The proposed deal, JOYBUSINESS understands is a private sector lead deal, which has resulted in the creation of the ‘Ghana Amalgamated Trust’ also known as a ‘Special Purpose Vehicle’.

The Trust is hoping to leverage some private pension funds being managed and “lend” it to these banks in return for equity or call it a “controlling” stake.

What would deal mean to affected banks?

JOYBUSINESS is also learning that this is not free money or bail out, but rather, more of a support that would result in having equity in these banks. We are also learning that this deal would result in a possible takeover of key positions in the banks like Managing Directors and Financial Controllers.

There are also plans to float their interest and possibly list on the Ghana Stock Exchange. We are also learning that in the future some of these banks could be merged.

It is still not clear for now the total number of local banks that have finally signed up to the proposed financial arrangement that would help them recapitalize.

Some of these banks are still looking at whether they should take up this government backed deal or go ahead with their plan to merge with other banks.

Source: Myjoyonline.com
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