Banks to lose GH¢6bn government cash

An audit carried out last year puts the value of government funds held by commercial banks at a little over GH¢6 billion.

TSA is to serve as a unified Structure of government account to give a consolidated view of government cash and resources, including money received by covered entities.

TSA proponents

Proponents of TSA say some commercial banks are holding government’s free float money at zero to minimum interest rates and are investing such monies in Treasury Bills at higher interest rates.

Banks investment in T-Bills is 72%

According to the May 2017 Banking Sector Report by BoG, banks investments in Treasury Bills was 72 percent.

Govt borrowing its own money from Commercial Banks

What this means is that government is borrowing its own money, which is being held by commercial banks, and paying higher interest rates on Treasury Bills to the beneficiary banks.

The interests on government’s domestic borrowing would go down as it would reduce the net amount to be borrowed, as well as reduce interest on expenses.

Proponents argue that moving these funds could force the banks to be innovative to grow their loan books as well as serve customers better.

Government position

Government says it wants to deal with corruption; leakages, waste and to let managers appreciate the total amount of funds in the state coffers.

Furthermore, government wants to use the policy to encourage banks to lend to the private sector as most of the banks depended on the government’s funds to improve their liquidity.

Liquidity crisis in banks

Beneficiary banks, especially local banks and some industry analysts, hold the view that the implementation is likely to cause a liquidity crisis in banks, as the public sector fund, currently in the vaults of banks, would have to be lodged at BoG.

Some bankers say because government is the biggest spender in the country and the economy is not adequately diversified when it comes to liquidity and resources, the move could adversely affect local banks.

BoG should reduce reserve requirements

To avert a liquidity crisis, some analysts want BoG to reduce its reserve requirements or banks in addition to other measures.

Govt institutions owe commercial banks

According to the banks, a significant portion of commercial banks’ funds has been advanced as credit mostly to government institutions and related government projects with overdue repayments, adding that such facilities have, over the years, been provided to support the economy.

Balance sheet mismatches and negatively impacts

They, therefore, said the transfer of the accounts without the settlement by the government of the overdue credit to government institutions and related (government) projects would create significant balance sheet mismatches and negatively impact on the financial sector in particular and the economy as a whole.

They also pointed out that given government’s indebtedness to commercial banks and other concerns, the banks are placed in a position which constrains them to meet the request to transfer Government of Ghana account balances to BoG .

The local banks further noted that most of the covered entities were customers of the commercial banks and like any other customer, most of these entities have credit facilities from indigenous banks while maintaining that some even have deposit accounts with them.

Govt should first settle indebtedness

It will be lopsided if their accounts are moved without a correspondent settlement of their indebtedness.

Good Corporate Partners

“Commercial banks in the country have been partners in the development agenda of the government “The banks have invested in and deployed robust infrastructure and branch networks throughout the country, which are assisting governmental institutions in accessing their revenues in areas which would otherwise have been challenging,” the local banks argue.

The growth in the real sectors of the economy stemming from credit advanced to the private sector and to institutions providing critical services is likely to be adversely affected, with the attendant political and social implications, if this substantial source of liquidity is denied commercial banks.

A case in point is the assistance the commercial banks provided to the energy sector during the power crisis.

Govt should address exposures

For effective implementation of the TSA and to ensure stability in the system, the banks recommended that government should address the exposure of its institutions and related government projects to the various banks.

The banks reiterated their support for government business by continuously providing fund management solutions that would ensure that a competitive rate of return is applied to all idle credit balances for the purpose of revenue maximisation and ultimate value creation.

Breakdown of govt bank accounts

In the 2016 supplementary budget statement, Seth Terkper said about 11,500 bank accounts had been identified, out of which, 5,500 were at BoG, while 6,000 were with commercial banks.

Out of the number at the BoG, 3,160 were closed and 700 have been set up under the Ghana Integrated Financial Management Information System (GIFMIS).

Work is currently going on to streamline the remaining 1,640 at the BoG and those at the commercial banks.

How TSA operates

A TSA is a unified structure of government bank accounts enabling consolidation and optimal utilisation of government cash resources. The Public Financial Management Act 2016 (ACT 921) requires government to set up this account.

It is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments and gets a consolidated view of its cash position at any given time.

Under the policy, Ministries, Departments and Agencies (MDAs) will pay government revenues, incomes and other receipts into a Treasury Single Account (TSA) at BoG as a means of centralising deposits.

All receipts due to government or any of its agencies are paid into TSA or designated accounts maintained and operated in the BoG.

For any agency that is fully or partially self-funding, Sub-Accounts linked to TSA are to be maintained at BoG and the accounting system will be configured to allow them access to funds based on their approved budgetary provisions.