The Second Deputy Governor of the central bank, Elsie Addo Awadzi has said a robust corporate insolvency regime will play a critical role in facilitating a post-COVID-19 economic recovery.
According to Mrs Awadzi, helping to resolve the inevitable debt-overhang from the pandemic, will aid Ghana in reorganising viable but distressed firms while ensuring the exit of non-viable ones.
Addressing participants at a webinar for the Ghana Association of Restructuring and Insolvency Advisors (GRIA), the deputy governor said the BoG’s banking Act 1015, when in force, will become handy in the months and years ahead.
“If the recent banking sector clean-up is anything to go by, the orderly exit of non-viable institutions from the market place creates room for viable ones to thrive and support the economy better,” she stated.
“The clean-up exercise, which saw the revocation of licences of 420 banks, specialised deposit-taking institutions, and non-bank financial institutions, was necessary to save the financial system from total collapse given the level of interconnectedness in the system,” Awadzi added.
The deputy governor disclosed that out of the 420 insolvent banks, 9 banks, 23 savings and loans and 347 microfinance companies are currently being resolved under the special resolution regime established under section 123 of the Banks and Specialised Deposit-Taking Institutions Act of 2016 (Act 930).
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.