It is not true that critics of banking sector cleanup have no alternative solutions

There have always been alternative approaches to managing financial and banking sector crises. One alternative, the first option preferably, is to look at the entire cleanup as a link such that a prescription to one bank will have positive effect on other banks, other financial institutions and firms within the link.

In the recent Ghanaian case, this was not the approach adopted after Act 930 was passed in 2016 and became effective in 2017 January, hence the piecemeal approach and segmented strategies with cumulative risky financial effects on the public debt situation.

As a matter of fact, the Energy Sector Levies Act (ESLA) passed by Parliament in 2015 remains an important part of the solution package. This helped to raise revenue to amortize the infamous legacy debts so that the distressed banks were relieved. With ESLA as an alternative solution created back in 2015, no one can pretend that the solutions to the crisis only started in the year 2017.

Again, all the laws being used to deal with the corporate governance aspects of the problem, licensing and general management of the banking and the financial sectors such as Act 930 and Act 929 were put in place in 2016.

Among the issues raised from the beginning when the cleanup started was the call for a special dispensation to protect indigenous banks. The present Governor of BoG, Minister of Finance, and key spokespersons for government all concluded that the only way forward for Ghanaian owned banks was mergers.

Interestingly, the BoG eventually granted some selected indigenous banks bailouts as announced with the creation of GAT when the banks failed to meet the December 2018 deadline. Clearly, this was an afterthought.

One other alternative during the cleanup was for the regulator and key government actors to be circumspect and manage information properly so as to avoid panic withdrawals, sustain confidence in the sector, and prevent the chain of direct and indirect job losses we have witnessed from the approach adopted by the actors.

Without doubt, one important alternative could have been for the government to pay contractors and other direct indebtedness to deserving banks to avoid the cascading and contagion effects on some of the banks whose licenses were finally withdrawn.

Further to the above, I believe that for the preceding government and actors to have put in place all the necessary laws which support some of the current actions being taken remains the relevant component of the solution mix and the alternative approaches to the banking and financial sector crisis in Ghana.