A banking consultant and former Deputy Governor of the Bank of Ghana (BoG), Mr Emmanuel Asiedu-Mante, has advised President Nana Addo Dankwa Akufo-Addo, to stay out of a central bank directive asking all banks to recapitalise to GH¢400 million by December this year.
Should the President wade into the directive, as is being requested by a group of local banks, Mr Asiedu-Mante said President Akufo-Addo would be undermining the independence of the BoG, which can then set a “bad precedent” for the central bank, going forward.
Instead of issuing a presidential fiat to extend the date of recapitalisation for the local banks, the banking consultant, who retired from BoG in 2006, said the President should leave the matter to the board of the central bank to decide.
“This is not a presidential matter and I will strongly advise for the President to stay out of it,” he told the Graphic Business on April 10.
“This is an operational issue, not a policy issue, and if you say the central bank is independent operationally, then this falls into that category and so it should be a decision for the board of BoG,” he added.
Local banks petition
Since late last month, indigenous banks have been making a strong case for the President to prevail upon the BoG to extend the deadline for meeting the new minimum capital of GH¢400 million.
In a letter to the President, the banks, which have constituted themselves into the Association of Indigenous Universal Banks, insist that their individual constraints made it impossible for them to recapitalise to GH¢400 million by December and that forcing them to honour that directive would result in their collapse and the dilution of indigenous ownership in the sector.
As a result, they said rather than raising their respective capitals to GH¢400 million, the indigenous banks should be given reprieve to recapitalise in stages over a five-year period.
They explained that they could only recapitalise to GH¢170 million by December 2018, GH¢220 million by December 2019, GH¢280 million by December 2020, GH¢340 by 2021 and GH¢400 million by December 2022.
Subsequent to the letter, the Graphic Business understands that managing directors of the banks met with the presidency over the matter this week.
While their demands are genuine, Mr Asiedu-Mante noted that it could be a trap for both the BoG and the President.
“The President has power to do anything but it is the consequences of those actions that matter.
“Once you start interfering in decision making at the central bank, then depending on who is on the seat there, the likelihood that the person will subsequently be looking over his shoulders and asking ‘will the President be favourably inclined to this’ is very high,” he stated.
That, he said, would then devalue the independence status of the BoG granted it by the 1992 Constitution.
With a chunk of the board members being government appointees, the retired deputy governor said it was easier for the government to have its position implemented without passing it through the President.
“And to all intents and purposes, when it comes to the nitty-gritty, I think those at the BoG – the governors – are closer to the board than the President.
“The President wields power, yes; but when it comes to banking, the governors are those to rely on. So, I would not advise the President to come in,” he stressed.
Meanwhile, an independent assessment by a credit consultant, Mr Emmanuel Akrong, of the capital positions of the 16 local banks, revealed that except GCB Bank, which has already met the new minimum requirement, all have capital shortfalls.
The shortfalls range from GH¢59.8 million to about GH¢350 million, according to him.