A retired Deputy Governor of the Bank of Ghana (BoG), Mr Emmanuel Asiedu-Mante, is optimistic that confidence in the local banks and the entire banking sector will rebound with time after measures taken by the government and the central bank have ensured that no depositor loses money as a result of the collapse of the seven banks.
He said the 13 indigenous banks would return to winning ways soon when the anxiety created by the collapse of the seven banks was settled.
“To the extent that measures are being taken to ensure that no depositor losses his or her money, then the confidence will return,” he said when asked how the country could help restore confidence in the banking sector and the operations of indigenous banks in particular.
Mr Asiedu-Mante told the Daily Graphic yesterday that he expected the confidence to be restored between three and six months after the historic withdrawal of the licences of five banks and the subsequent transfer of their assets and liabilities to the newly established Consolidated Bank Ghana Limited.
He added that although the BoG’s measures might appear Draconian currently, people would later appreciate them when the measures started bearing fruits in the form of a strong, solid and resilient banking sector capable of supporting economic growth.
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He explained that the decision to use public funds worth about GH¢8 billion to cover the deposits of customers of the collapsed banks meant that depositors would still have faith in the ability of the government and the BoG to protect their deposits, irrespective of the depth of the measures taken to sanitise operations of the banks.
“If the people lose money as a result of the measures being taken, then they will lose confidence, but to the extent that that is being protected, then I do not think there is any cause for alarm,” he added.
The retired central banker said he was convinced that “sanity will be restored and then the confidence will come back” to the entire banking sector and the operations of indigenous banks in particular.
Data released by the BoG on September 21, 2017 showed that business and consumer confidence in the economy had declined to a 12-month low.
The banks’ confidence survey showed that while the consumer confidence index (CCI) declined from 107.6 points in August 2017 to 98.1 points in August this year, the business confidence index (BCI) also fell from 101.2 points to 99.9 points within the same period.
A financial economist and Executive Chairman of SEM Capital, Dr Sam Mensah, said that showed less optimism about the future.
“It means that consumers and businesses are less optimistic about the future. This slows down consumption and investment, hence the growth of the economy,” he said in a separate interview.
Asked if the decline in confidence was linked to the cleaning up of the banking sector, which saw the collapse of the UT and the Capital banks in August 2017 and the Sovereign, uniBank, BEIGE, Royal and Construction banks in August this year, he said: “Obviously; the collapse of the banks is a confidence destroyer.”
While agreeing with Dr Mensah, Mr Asiedu-Mante explained, however, that the drop in confidence was natural and would be reversed in due course.
Basing his optimism on previous experiences in 1979 when the military regime at the time de-monetised the then 50-cedi note and in 2000 when two banks — the Bank for Housing and Construction and the Cooperative Bank — collapsed, the retired BoG Deputy Governor said what was happening was not new.
“When the 50-cedi note was demonetised, people said that nobody was going to send money to the bank again, but after a while the whole storm weathered and it came back to normal.
“So I see this as a temporary something; people will later come to appreciate the measures being taken,” he said.
Mr Asiedu-Mante was, however, concerned that of all the banks operating in the country, only indigenous ones had been found to be contravening central bank regulations.
He blamed that on the lack of discipline and respect for rules on the part of Ghanaians.
“The local banks should learn to observe the rules. The message that our local banks need is that there is a law governing the operations of banks. They should learn to respect that law,” he said.
He further advised managers and shareholders of banks to ensure that their staff were well trained in their various areas of operations.
“They should employ people who understand banking and will respect the law. The boards should also be competent and understand what they are doing,” he added.