The latest developments in the banking sector should be a wake-up call for the central bank to critically sanitise the entire financial services sector to prevent the collapse of the system, an international investment consultant, Dr Sam Ankrah, has said.
“After dealing with the universal banks, the central bank must also move swiftly to deal with the mess in the savings and loans, as well as the microfinance businesses because that is another area with a lot of rot,” he added.
Dr Ankrah made the call in an interview with the Daily Graphic following the collapse of five banks by the Bank of Ghana (BoG) last week.
The entities are uniBank, The Royal Bank, Sovereign Bank, Construction Bank and BEIGE Bank. After the revocation of the licences, BoG subsequently merged them into a new bank - the Consolidated Bank Ghana Limited. Subsequently, the government has capitalised the new bank to the tune of GH¢450 million and issued a bond of up to GH¢5.76 billion as assets for it.
The banks were found to have committed various regulatory and financial breaches that made them insolvent and unfit to continue operations according to the industry regulator.
Earlier, UT Bank and Capital Bank had also fallen under the hammer of the central bank and were absorbed by the Ghana Commercial Bank.
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Rot in the sector
Zeroing in on the savings and loans and microfinance sector, Dr Ankrah said the signals had been clear on the wall since 2015 but wondered why very little had been done to sanitise the sector.
According to him, at a time when many were being encouraged to
“Banking helps build a strong economy and we should have more people doing that and not a few,” he said.
Dr Ankrah wondered why the central bank had allowed the small financial institutions to operate when
His call comes at a time when some industry analysts hold the view that directives for recapitalisation are not the way to go to sanitise the troubled financial services sector.
According to them, asking the players in the industry to recapitalise without strongly supervising their operations to check the rot would lead to more breaches of the regulation.
They said cracking the whip to ensure good corporate governance and strict adherence to the rules should be first before anything else.
Dr Ankrah asked the BoG to purge itself of all persons who advertently played a role in hiding the true status of the collapsed banks.
“Those behind that should not be let off the hook because they are the worse culprits; either they do not know their job or deliberately, for whatever reason, ignore what should be right to approve the wrongs,” he said.