BoG clean-up, recapitalisation have positioned banking sector to manage COVID fallout – EIU

Dr Ernest Addison 480x430 1121212 Governor of the Bank of Ghana, Dr. Ernest Addison

Wed, 20 Apr 2022 Source: www.ghanaweb.com

BoG undertakes banking sector clean-up exercise in 2017

Regulatory measures by BoG leave banks in a reasonable position – EIU report

Banks remain reluctant to lend to private sector – Report

The Economist Intelligent Unit (EIU) has given its verdict on Ghana’s banking sector.

According to an assessment report published on April 13, 2022, the London-based firm said the Bank of Ghana’s banking sector clean-up and recapitalisation efforts have positioned the sector to better manage the fallout from the COVID-19 pandemic.

Despite this, the EIU said the asset quality of the banking sector remains weak.

“In addition, regulatory reforms to boost liquidity and the BoG's stated willingness to enact further reforms, if necessary, have enhanced the sector's capacity,” the report outlined.

Touching on some negative factors in Ghana’s banking sector, the Unit said commercial banks in the country remain reluctant to lend to smaller businesses, owing to continued high Non-Performing Loans, combined with limited credit data which has reduced liquidity in the economy.

On the rating outlook, the EIU ranked Ghana’s banking sector at the riskier end of the B band and a downgrade to CCC which it pointed cannot be ruled out.

“If foreign-exchange inflows dry up and the net foreign-asset position of commercial banks diminishes. Rating stability is the expected outcome, however, as real GDP is projected to return to growth in 2021, and this will help to strengthen asset quality and reduce the NPL ratio,” the EIU report explained.

The banking sector clean-up exercise undertaken in 2017 saw the Bank of Ghana revoke licenses of nine (9) banks including Heritage Bank, Limited, Premium Bank Limited, uniBank, Sovereign bank, BEIGE Bank, Royal Bank, Construction bank, UT Bank and Capital bank.

In addition to this, over 40 other financial institutions were also affected by the clean-up which included some fund management firms.

The government said it has spent GH¢22 billion to clean-up the banking sector.

The move, it explained, was to save the deposits of clients of the various banks that compromised Corporate Governance for their interest.

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Source: www.ghanaweb.com
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