Banking sector clean-up has yielded no positive results – Economist

Economist and Senior lecturer of the Department of Finance at the University of Ghana Business School, Lord Mensah, has opined that the financial sector clean-up embarked on by the Government in 2017 has not yielded any positive result as was expected.

He was of the view that some banks are struggling despite the clean-up which promised a robust banking sector.

In an interview with Samuel Eshun on the Happy Morning Show, he shared: “We were told the banks were in good standing. A bank that is in good standing should be able to go through the core mandate of taking deposits and giving out loans but did we see that in this country after the clean-up in 2017. We didn’t see that and that should even tell you that there is something wrong with the banks. When the clean-up was done, they could not give out loans as expected. Some of the banks do overnight lending among themselves to survive.

So, if the horizon of investments and giving out of loans by the banks among other things are very short, that means they are actually having liquidity challenges to the extent that the core activity on the banks’ balance sheets that gives them money is the treasury bill that they buy from Government. We were expecting that gradually, the banks will be retaining more in profit but we did not see any of these improvements”.

Dr. Mensah furthered that with the current situation of these banks, imposing a 5 percent financial sector clean-up levy on bank’s profit-before-tax was not the way to go.

Caretaker Finance Minister Osei Kyei-Mensah-Bonsu in his Budget Statement presentation to parliament revealed that the financial sector clean-up came at “a huge cost of over GH¢21.0 billion to the government”.

Thus, the government will “introduce a financial sector clean-up levy of 5% on profit-before-tax of banks to help defray outstanding commitments in the sector”.