Business News Wed, 13 Nov 2019

Fin. sector clean-up cost GHS16.4bn; no firm 'intentionally collapsed' – Ofori-Atta

The Ghanaian taxpayer will pay GHS16.4 billion for the clean-up exercise in the bank, microfinance, fund management; and savings & loans sectors, Finance Minister Ken Ofori-Atta has revealed.

Explaining to Parliament the fiscal impact of the financial sector clean-up when he delivered his 2020 budget on Wednesday, 13 November 2019, Mr Ofori said: “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”.

He said the interventions by the government “to save depositors and investors whose funds were locked up with failed financial institutions has been very costly”.

In 2017 and 2018, Mr Ofori-Atta said the government spent a total GHS11.7 billion to safeguard the deposits held by universal banks that were resolved by the Bank of Ghana, and to set up the Consolidated Bank Ghana (CBG) Limited.

These amounts, he noted, were mainly through the issuance of government debt to both GCB Bank and CBG.

This year, he added, “the government had to, again, intervene to provide relief to depositors when the Bank of Ghana revoked the licences of 347 microfinance institutions, 15 savings & loans and 8 finance houses. The total bailout cost estimate for this exercise was GHS2.4 billion”.

Also, he said the Securities and Exchange Commission also revoked the licences of 53 Asset Management Companies that were distressed, with an estimated fiscal cost to protect investors of GHS1.5 billion.

“In addition, the government also provided bridge funding of up to GHS800 million for Ghana Amalgamated Trust (GAT) to enable it invest in four indigenous banks that were struggling to meet the minimum capital requirement GHS400 million”.

“These interventions”, Mr Ofori-Atta observed, “were timely” to ensure that the financial system was “safeguarded” and “relief provided” for the “many families and businesses”, as well as the jobs and local interests in the financial system “protected”.

“Mr Speaker, it is important to state that the 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 4 million depositors and investors. Our commitment is to ensure that we provide relief to many of the victims”, he said.

Mr Ofori-Atta also said the government acknowledges “the pain and distress that has befallen depositors and investors, including pensioners, market women, and churches who placed their confidence in these financial institutions”.

“The ongoing prosecutions will ensure that all those culpable as well as the negligent officials of the regulators will face justice as soon as possible. With this clean-up, the financial sector is now sanitised and public should have confidence in the sector”.
Source: Class FM
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