Restoring confidence in the local banks

BY: Graphic Editorial
Library photo
Library photo

The growth of every country is largely dependent on a strong and vibrant financial services sector, particularly banks.


 Banks, by their nature as lenders and deposit takers, can make or break an economy.

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Many years ago, the challenges in the banking sector in the United States of America and elsewhere in Europe, among others, caused a global recession and brought many big economies to their knees.

The shock was felt in developing countries, many of which depended on the developed world for support to build their economies.


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The issues that caused the mess in the banking sector forced regulators of that industry to lift their game and tighten regulations to ensure that the oversights among other factors that brought the problems, did not recur.

Last year, the Bank of Ghana (BoG) directed the banks to recapitalise from the present GH¢120 million to GH¢400 million by the close of the year.

The intentions were clear. Among others, the directive was meant to sanitise and restructure the operational processes of the banks to be in line with global trends and also for the banks to survive any depressed economy, if there was one.

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Since the announcement, the country has witnessed one of the worst storms in the banking sector with the local banks being at the forefront of what many have described as the most scandalous happenings ever to be recorded in the history of the sector.

Seven local banks were declared insolvent and forced to close.

The ripple effect of this scenario has forced many to lose confidence in the local banks in the country. Much as the BoG has taken some steps to restore confidence in the local banks, both Ghanaians and foreigners are not too comfortable working with some of them, fearing that, in the short to medium term, the BoG may be forced to close down some more for their inability to live up to expectation.

The GRAPHIC BUSINESS fully supports the efforts of the BoG in improving confidence in the local banks and we call on those withdrawing their monies to rescind their decision.

What we should know is that, by refusing to do business with the local banks, a friend, a relative or a family member could potentially lose his or her job. That is not to say that based on that fear, the rot should be allowed to continue.

In asking the general public to continue doing business with the local banks, we also are of the view that a lot more depends on the directors and shareholders of the banks themselves.

They need to demonstrate beyond reasonable doubt that they are up to the task. The lavish lifestyle of some of the executives and their managers on the back of the depositors funds must stop.

They also need to heed to strict corporate governance practice and must also be seen to be engaging in profitable activities that will not only ensure real returns on the investments but also, can guarantee the future of the bank.

Banking is about confidence.

If for nothing at all, our local banks must be highly solvent, that is, under no circumstance should they have more liabilities than assets with which to operate.

This is to ensure that they significantly reduce the risk to depositors’ funds.

The local banks must ensure liquidity at all times.

This means that they must not be faced persistently with liquidity shortfalls.

Finally, we believe that the best way to restore confidence in the banks is for the state to ensure that all those whose actions or inactions caused the collapse of the banks are not spared.

We have had enough of the talk and the time to act is now to set a positive and lasting example to deter others from doing same.