The Governor of the Bank of Ghana, Dr Ernest Addison, has made a strong case for indigenous banks to consolidate into big lenders that can contribute to the realisation of the agenda of the government to move ‘Ghana Beyond Aid.’
Failure to do that, he said, would undermine the government’s resolve to build a resilient financial sector and a robust economy that is self-reliant and independent of foreign aid.
Speaking at the GRAPHIC BUSINESS/Stanbic Bank Breakfast Meeting in Accra yesterday, Dr Addison said for the financial sector, a ‘Ghana Beyond Aid,’ which is the fulcrum of the President’s development agenda, required that indigenous banks were self-reliant, strong, well capitalised and liquid.
The call comes at a time when the President, Nana Addo Dankwa Akufo-Addo, in realising the potential of the country, is drumming home the need for Ghana to go beyond aid and to rely on its own capacity to accelerate the country’s development agenda.
“The Ghana Beyond Aid for the financial sector seeks to achieve bigger, well-capitalised Ghanaian owned banks, shifting away from small owner, family-managed banks with governance challenges.
“We think that we will need well-capitalised domestically owned banks that have effective board oversight with very high corporate governance standards. These are ingredients for stability and sustainability of the banking sector,” Dr Addison said at the event, where he was the guest of honour.
Banking sector not foreign-dominated
Held on the theme: ‘Deposit insurance, catalyst for a stronger banking sector,’ the GRAPHIC BUSINESS/Stanbic Bank breakfast meeting was to afford players in the banking space the opportunity to deliberate on the pros and cons of deposit insurance, which is now mandatory, following the passage of the Ghana Deposit Protection Act, 2016, Act 931, two years ago.
It also provided the platform for the central bank to update the country and the banking fraternity, in particular, the state of affairs of the deposit insurance scheme.
Dr Addison, who described deposit insurance as “an additional safety net for small depositors,” explained that its introduction was to complement ongoing efforts by the central bank aimed at creating a stable financial sector.
Those efforts, he said, included the recapitalisation directive that required banks to increase their minimum capital to GH¢400 million by December this year.
“All things being equal, we expect that with a strong and well-capitalised banks, at least the sector will be well positioned to offer safer services to customers than in a position in which the banks have weaker capital,” he said.
As a result, he said, the BoG was not putting much emphasis on deposit insurance but was also working to ensure that banks have adequate capital.
On concerns that the banking sector was foreign-dominated, Dr Addison said data available to the bank proved that such an assertion was false.
“If you look at the numbers, in terms of banks that are domestically controlled and those that are foreign controlled, I think that the numbers are just balanced,” he said, but added that the government would now look to tilting the table in favour of indigenous banks.
Application of discretionary powers
On how the bank seeks to achieve this, the governor later hinted, in an interview, that BoG would not hesitate in exercising its discretionary powers in a manner that would help encourage Ghanaian owned banks to increase their stake in the banking sector.
He said although the recapitalisation directive could force weak indigenous banks to dilute their holdings with foreign capital, the BoG would be choosy about “approving whatever proposal they will bring.”
Vision for financial sector
On the vision for the financial sector, Dr Addison said the Ghana Beyond Aid required that, “we look at a Ghana that is economically diversified that can have a financial sector which will assist in structural transformation agenda and we think the private sector has a big role to play in that.
“The financial sector is expected to be well positioned to finance these private sector-led activities,” he said, explaining that the BoG believed that more benefits would be gained, if banks consolidated.
The Managing Director of Stanbic Bank Ghana, Mr Alhassan Andani, said deposit insurance was long overdue, given the importance of the scheme to the operations of banks and their deposit customers.
“It is our view that the most important topical issue impacting the financial services sector is deposit insurance.”
“My personal view is that this is long overdue because banks insure buildings, machines and everything to protect themselves. Deposits are stock in trade, which people trust us and bring and it is only appropriate that these deposits are insured,” he said.
He, however, explained that the decision to insure deposits meant that deposits had risks. As a result, he said it now behoved depositors to be discerning in choosing which bank to save with.
“So, it is basically an awareness that says please balance your risk rewards. For those who pay exorbitant interest, they are probably in the risk category that you must be aware of and those who pay small interest too, they are also in another risk category that you should be aware of too,” he advised.