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Some things look like gold

Some things look like gold

I studied Advanced level Economics but I do not remember reading anywhere that private banks are not that private; that they become public or taxpayers’ liabilities when they fail.

I was upset to hear that the government was to issue a two billion cedi bond to settle the total liabilities of UT and Capital banks estimated at GH¢ 1.6 billion. As far as I am concerned, a bond is a debt. Debts are to be paid. They are paid by the government which takes the money from the taxpayer.

Why should I be upset? It is because, as Economist Dr Ebo Turkson puts it, the private banks are comfortable in the knowledge that “when things are not managed properly and there is a takeover... they will get the government coming in to pay up for their mess” (credit: Citi Business News).

When on Tuesday, March 20, 2018, the Bank of Ghana (BoG) announced a take-over of the management of uniBank, the reason it gave was that it was an act “to save uniBank from collapse.”

An ‘A’ Level Economics pass does not make me an economist and I must admit that I am out of my depths regarding many of the issues arising from the banking crises of 2018. Fact, however, is that even if I don’t have a PhD in Economics, I am neither deaf nor blind. I heard Dr Ernest Kwamina Yedu Addison, Governor of the Bank of Ghana, say that “though the failure of the two banks was due to significant capital deficiencies, the underlying reason was poor corporate governance practices within these institutions.”

Besides, “undue influence” exerted by shareholders on management, Dr Addison revealed that “very high executive compensation schemes were being operated by the affected banks which were not commensurate with their operations. The risk and earnings profile of the banks could not support the compensation schemes,” including business class plane tickets.

It is not the first time in the world that banks are collapsing, but what the above point by the BoG means is that our banking system didn’t learn anything from the US example of 2008 which affected the likes of Lehman Brothers, Merrill Lynch, AIG, Freddie Mac, Fannie Mae, Fortis, among other financial institutions hitherto considered unsinkable. One of the reasons for the collapse of the banks was “very high executive compensation schemes” given in the name of attracting the best minds in the land.
Dr Addision reported that “Some non-executive directors were also acting as consultants to the same banks... which gave rise to conflict of interest situations.” Can you imagine!

In the specific example of uniBank, I should be the first to admit that anybody can go broke, even a bank: the circumstances may be beyond control. However, as a taxpayer, I should be worried – even angry – when I am told that the bank “failed to comply with a directive of the Bank of Ghana, prohibiting the bank from granting new loans and incurring new capital expenditures”, and that the bank was “generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.”

For a bank whose owner was once the Governor of the Bank of Ghana and one-time Minister of Finance of the Republic of Ghana, it sounded unbelievable to hear that uniBank “refused to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities”.

Dr Duffuor (the original) is one person I adore. After he left office, I went to him to express my admiration because as Finance Minister, he never took salary. He owns Star Assurance Company and the EIB Group in whose stable are Star FM, GHOne. I know he was the brain behind the success of Prime Insurance which he set up for the Assemblies of God Church.

So with all these credentials, whatever was it within uniBank that Dr Duffuor didn’t see or hear of? Was he too far removed from the day-to-day governance?
Same questions for Pastor Mensa Anamoa Otabil. I have sat under this man’s ministry for many years and I can testify of the changed lives which his messages have brought in both his congregation members and outsiders, including non-Christians.

Nonetheless, the governance reasons cited by the Bank of Ghana are the very avoidable pitfalls which he himself has preached against even in his sermons.
Is it not time to take a look at the Banking Awards? If the organisers cannot get into the “real figures”, then they have no right putting up a show whose effect – even if unintended – is to draw depositors towards banks deemed “successful” by the award system.

Talking about awards, what happened to the RLG founder and his dreams which won him numerous awards all over the place?

For me, however, the UT, Capital and uniBank failures point out one thing: Ghanaians have not failed: some Ghanaians have failed Ghana. After all, are the staff of KPMG not also Ghanaians? Why is KPMG so dependable? It is because the systems they have put in place work – or are allowed to work. The story of the collapsed banks is the story of a few shareholders and directors whose egos and greed got in the way. Everybody wants to fly and shop in style in Europe and USA.

Some things are gold; other things look like gold.

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