Financial sector clean up cost gov't GH¢13.6 billion in Q1 2020 - Ofori-Atta

Government of Ghana has spent an amount of GH¢13.6 billion in the first quarter of 2020 as a result of the financial sector clean-up exercise undertaken by the central bank, the Bank of Ghana (BoG).

According to the Finance Minister, Ken Ofori-Atta, the said amount, representing 3.5 percent of Gross Domestic Product (GDP), was spent on the resolution of failed and insolvent banks.

Speaking on the floor of Parliament on Thursday, July 23, 2020 Ken Ofori-Atta said: “As at the end of first quarter 2020, a total amount of GH¢13.6 billion (3.5 percent of GDP) has been spent on the resolution of failed banks, Specialised Deposit-taking Institutions (SDIs), Micro Finance Institutions (MFIs), the establishment of the Consolidated Bank Ghana Limited (CBG), as well as the capitalisation of the Ghana Amalgamated Trust(GAT).”

He added the mismanagement on the part of the directors of the collapsed banks and financial institutions resulted in the clean-up exercise and that government did not conspire with the BoG to cause the collapse as suggested by some.

“Let it be said that a serious government, as we are, desperate as we were to fix a broken economy as it was and fund our own programmes, as promised, and as patriotic as we are, had absolutely no thoughts, no time, no energy or the luxury to conspire with the central bank to deliberately cause the downfall of Ghanaian banks that were already in zombie state, fatally insolvent, by the time we took office. What we did was to merge those that had failed, save those that could be saved with the view to building a strong and viable financial sector with integrity. What the President did, which is unusual in banking practice, globally, was to go the extra mile to save the funds of all depositors of failed banks” he explained.

As part of its efforts to restore confidence in the banking and specialized deposit-taking sectors, the Bank of Ghana (BoG) embarked on a clean-up exercise in August 2017 to resolve insolvent financial institutions whose continued existence posed risks to the interest of depositors.

The clean-up saw the revocation of licenses of 9 universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, 8 finance house companies, and two non-bank financial institutions.

The move by the central bank was a comprehensive assessment of the savings and loans and finance house sub-sectors carried out by the BoG in the last few years after it identified serious breaches.