Banks closure will ensure sanity in the sector – BoG

The Second Deputy Governor of the Bank of Ghana (BoG), Elsie Addo Awadzi, has explained the Central bank’s decision to clean-up the banking and financial sector.

The clean-up, according to her, is a delicate balancing act to ensure sanity in the banking sector.

She said failed banks becomes serious sources of risk for the financial system and the economy, hence the reason for the clean-up.

Speaking at the Annual General Conference of the Ghana Bar Association (GBA), held in Koforidua she said “As the regulatory authority, we are always mindful of these potential fallouts when we use our resolution powers. We therefore strive to implement them in a manner that mitigates the potential socio-economic impacts of the closure of banks.

This comes in the wake of the collapse of some seven banks within the last 12 months.

Five of the banks; UniBank, Sovereign Bank, Beige Bank, Construction Bank and Royal were merged under a new name Consolidated Bank Ghana.

The collapse of the banks has caused over 2000 workers lose their jobs.

Mrs. Awadzi believes the current banking crisis is as a result of the creeping culture of disrespect for the rule of law, ethics, and systems.

She however stated that the Central bank is rolling out a number of measures to make the banking sector more robust following the crisis in the sector.

Directive on Risk Management

Bank of Ghana (BoG) would soon issue a directive on risk management for players in the financial sector.

The directive, according to the Deputy Governor, forms part of the Central Banks commitment to restoring trust and confidence to the banking system and to promote stability and integrity of the sector.

“We are strengthening our regulatory and supervisory capacity through improved systems, processes, accountability, and training, to enable us to better identify violations and early warning signs, enforce the law, and ensure that the banks take prompt corrective action to address emerging risks” she mentioned.

Assist Banks

The Deputy Governor further called on the Ghana Bar Association to assist banks in understanding the legal and regulatory environment in which they operate.

She said “The resulting costs to the nation are staggering. We must, as a nation, resolve that never again will we allow this to happen. We must call out bad behavior regardless of who is involved and be united around a set of values and standards to which we will hold banks and everyone else.”

The Conference of the Ghana Bar Association was held under the theme: “THE IMPACT OF TECHNOLOGY ON THE PRACTICE OF LAW; POSITIONING THE LEGAL PROFESSION AND THE JUDICIARY TO MOVE WITH THE CHANGING TIMES.”

It saw the election of renowned legal practitioner Tony Forson as new President of the Association.