Collapsing local banks unfortunate – IEA to BoG

The Institute of Economic Affairs (IEA) has raised concerns over the collapse of local banks by the Central Bank.

According to a Senior Economist at the Institute, the move by the Bank of Ghana has drastically reduced indigenous ownership of locals in the finance sector.

“Most of the banks that have collapsed were indigenous Ghanaian banks. And the point I am making is that, with their collapse, it looks like the indigenous ownership of the banking industry has decreased. In fact, this is unfortunate since indigenous ownership is key to the overall health of the economy,” he noted at a press briefing in Accra Tuesday.

He stressed: “This is a question that comes up. People have said, couldn’t the BoG and government have approached the reforms differently? The idea of establishing a Deposit Insurance Scheme has been mooted and it is not clear whether the scheme is fully functional, otherwise, they could have fallen on those funds to repay depositors”.

On August 14, 2017, the central bank of Ghana (BoG) in its press release announced its approval for the takeover of two indigenous banks, UT Bank LTD and Capital Bank LTD, by GCB Bank LTD.[1] BoG cited the insolvency of the banks in question, as the major reason for the revocation of their operation licenses. According to BoG, upon several agreements with the banks to increase their capital requirements, managers of the banks failed. Consequently, to protect customers, the licenses of the banks were revoked under a Purchase and Assumption transaction with GCB Bank LTD.

Roughly after a year later, on August 01, 2018, the central bank of Ghana again in a press release announced the consolidation of five indigenous banks to form a new bank called the Consolidated Bank Ghana LTD. The five collapsed banks included Unibank Ghana Ltd, The Royal Bank LTD, Beige Bank LTD, Sovereign Bank LTD, and Construction Bank LTD The same reason of insolvency was cited as a cause of the collapse of the various banks.