Collapsed banks had 'contagious effects' on remaining institutions – Ofori Atta

Thu, 14 Nov 2019 Source: www.ghanaweb.com

Finance Minister has reiterated the need for the collapse of some 23 financial institutions across the country.

Presenting the 2020 budget in Parliament on Wednesday, November 13, Mr. Ofori Atta insisted that the initiative by the Central bank was a necessary evil to avert the failure of the remaining banks.

He averred that contrary to the narrative being speculated out there, government did not have any malicious intent to destroy certain banking institutions, adding they had “contagious effects” on the rest.

“Mr. Speaker, it is important to state that government has not under any circumstances intentionally collapsed any financial institution.

These institutions were insolvent and/or distressed as a result of their own actions, and their respective regulators stepped in to intervene and to save over 4m depositors and investors. Our commitment is to ensure that we provide relief to many of the victims.

The total estimated cost for our fiscal intervention, excluding interest payments, from 2017 to 2019 is estimated at GHS16.4 billion, about 5% of GDP.”

“All the insolvent banks whose licenses were revoked by BoG, were indigenous banks which had a contagious effect on the remaining indigenous banks; making it hard for them to raise additional capital.”

Ken Ofori Atta also indicated that steps were underway to protect the over 5,400 direct and 12,000 indirect jobs in the sector.

“To ensure that indigenous sponsorship in the banking industry is protected, and over 5,400 directs jobs and 12,000 indirect jobs are kept, the Government set-up GAT and announced a major intervention to provide a sovereign guarantee of up to GH¢2 billion to GAT as a backstop to encourage investors to support our local banks.

Government successfully got the approval from Parliament to issue a Sovereign Guarantee for GAT to enable it issue bonds, and invest equity in the participating banks.”

Source: www.ghanaweb.com

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