Let’s not abandon local banks

As far back as 1896, the Gold Coast saw the establishment of its first bank, the Standard Chartered Bank. In 1917, it was followed by another foreign bank, Barclays, now rebranding to ABSA.

These banks existed for many decades until 1953 when Dr Kwame Nkrumah advocated an indigenous bank for Ghana, arguing that the foreign banks, both British, were taking care of their nationals, at the expense of Ghanaians.

That gave birth to the Ghana Commercial Bank in 1953.

Since then, many Ghanaian banks have sprung up in the system, with the early 2000s seeing banks from Nigeria, India, South Africa, among others, coming in to heighten competition within the industry.

Many institutions in the country have benefited from the services of Ghanaian-owned banks which prided themselves as being the best friends of small and medium enterprises (SMEs), majority of which are owned by Ghanaians.

It is, however, unfortunate that in recent times the Bank of Ghana (BoG) has had to crack the whip to sanitise what was most likely to bring the entire sector, and the economy, for that matter, to its knees.

In the last few months, seven local banks, namely, the Capital Bank, the UT Bank, the Sovereign Bank, uniBank, The Royal Bank, the Beige Bank and the Construction Bank, have suffered serious consequences for various breaches.

Two of the banks, UT and Capital, were absorbed by GCB Bank, while the remaining five were taken over by the state-owned Consolidated Bank which was formed to rescue the five and guarantee depositors’ funds.

The action of the BoG, albeit necessary but a shade late, has dampened the spirit of many customers of Ghanaian banks. It has made an already bad situation worse because since the directive to banks to recapitalise to GHc400 million by the close of the year, many local banks have faced an uphill task and pleaded for an extension, sending wrong signals to the public that they were not financially strong enough to do business.

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Today, there are reports of many depositors moving funds from the local banks to the foreign ones as a way of guaranteeing their deposits and investments. Much as this is necessary, it is equally dangerous for the remaining 13 local banks, including the newly established Consolidated Bank, leaving the foreign ones at a dominant 17.

The Daily Graphic empathises with the remaining local banks for losing their business to their foreign competitors, which have positioned themselves in a manner enticing enough to those moving funds to ‘safer’ places.

We wish to prevail on the public not to take any hasty decisions to condemn the remaining local banks, as their standing, per their published financials for the year, looks strong. Withdrawing funds from them may endanger their existence and their collapse may worsen the already bad situation as far as job losses are concerned.

We can understand why many may feel apprehensive, but we are convinced that the local banks have the potential to grow and need all their customers’ funds to be able to stand the test of time.

It is our hope that the BoG will strengthen its supervisory role and begin a process to reassure the public of the true status of the remaining Ghanaian banks to help win back the confidence of the public in them.