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Banks must learn from the global financial crisis — Vish Ashiagbor

BY: Emmanuel Bruce
Mr Vish Ashiagbor
Mr Vish Ashiagbor

The Senior Country Partner of PwC Ghana, Mr Vish Ashiagbor, has urged banks in the country to learn from the global financial crisis in 2008/2009.

He said many of the problems that were experienced by banks in that period was as a result of liquidity and solvency challenges, adding that how the global financial system reacted to the crisis provided lots of lessons for the banking industry in Ghana which is currently facing similar challenges.

Mr Ashiagbor was speaking at the GRAPHIC BUSINESS/Stanbic Bank breakfast meeting in Accra.

“If we take a few steps back to about 10 years when we had the big global financial crisis, I think there are lessons to be learnt,” he stated.

“What led to the crisis was banks taking more risks due to market conditions, regulations not being as proactive or strong as one would have expected, especially in the face of the lots of financial innovations and complex transactions that were being introduced around that time which typically were running ahead of the capacity of regulators in those various jurisdictions and ultimately, the system ran into problem,” he explained.

 


Response to crisis

Mr Ashiagbor noted that the strongest response to the global crisis came from stronger regulations which included the introduction of the Basel framework, which was what is not being used to benchmark the strength of regulations across countries.

“Following on from that crisis in 2009, we saw upgrades to the Basel frameworks which then brought into place stronger liquidity and stronger solvency requirement which many countries, including Ghana, have now moved to adopt,” he stated.

He said liquidity and solvency were very critical to the survival of banks, however, from a global perspective, a lot of countries are ahead of the country in terms of what they have done to manage liquidity and solvency risks.

“We are now catching up and I believe we are catching up quickly. we have some work to do but I believe we are on the right path,” he noted.

Interconnectedness of banks

The Senior Country Partner also urged the Bank of Ghana to address the liquidity and solvency challenges in the industry because the banking sector was interconnected such that the one or two banks who ran into problems quickly affected the whole sector if it was not properly managed.

He added that the banking sector was also largely run on confidence and therefore when the confidence in the sector shranks, then the whole sector became uncertain.

“Because of the role that banks play in the economies, it is important that we pay attention to these issues,” he stated.