‘BoG saved GH¢11bn customers’ deposits’ - Second Deputy Governor

Elsie Addo Awadzie, Second Deputy Governor of the Bank of Ghana (BoG), has disclosed that interventions made by the Bank of Ghana (BoG) and the Ministry of Finance recently in the country’s banking sector, which culminated in the amalgamation of some five banks, among others, helped to protect about GH¢11 billion of customer deposits.

This covered deposits and placements of other financial institutions (i.e. banks, savings and loans, RCBs, MFIs, insurance firms, securities firms and fund managers, and pension fund managers).

She said the move minimized job losses by saving some 3,500 or 70 percent of approximately 5,000 employees of the defunct banks.

Ms Awadzi disclosed this on Thursday in Accra during the Joy Fm Financial Sector Forum.

“The stability and integrity of our financial system should be of utmost important to everyone and the economy as a whole. Banks and other institutions that take deposits are regulated to help ensure that they remain safe and sound to perform their critical role in the economy.”

The BoG had to revoke the licences of some seven failed banks and appoint receivers for these banks.

Current state

Commenting on the current state of the industry, she said it was generally strong and continued to be profitable owning to a number of key indicators.

“For example total assets continue to increase; profitability remains high; industry capital adequacy ratio (CAR) of 19 percent compared to required minimum of 10 percent and the quality of bank loans continues to improve, with a reduction in non-performing loans (NPLs).”

Timely intervention

She further said the BoG’s recent actions were necessary to ensure that banks that failed were made to exit the market in an orderly fashion and without disruptions to the country’s financial system since failed banks become serious sources of risk for the entire financial system and the economy as a whole.

“The defunct banks had reached a point where they were no longer able to operate as banks. Four of the seven had been found to be significantly under capitalised as of the 2015/16, and subsequently became insolvent when their capital was further impaired due to bad loans and other irrecoverable assets. The other three defunct banks obtained their licences by false pretences through the use of suspicious and non-existent capital, which rendered them significantly undercapitalized compared to the minimum of GHS 120 million they were required to have.

“Underlying these failures were a pattern of poor corporate governance practices, insider dealings, misreporting, and other practices which put depositors’ funds at risk.”



Strict recovery efforts

She added that it was important that the costs of such interventions, which were borne by taxpayers, were recovered to the extent possible through recoveries from debtors, shareholders, and related and connected parties who took money from the defunct banks.

“The receivership processes are ongoing, and the receivers are making great strides in their recovery efforts. Amounts in excess of GH¢400 million have so far been recovered by the Receivers of the two banks closed last year.

“Dossiers on all seven banks have been handed over to EOCO for investigations and possible prosecutions by relevant state agencies.”

She said BoG’s own internal investigations into the conduct of Bank of Ghana (BoG) officials had begun with the establishment of the Office of Ethics and Internal Investigations, and that any officials (current and former) found culpable would neither be spared nor shielded by management.