Gov’t Loses GH¢9.9Bn Over Collapsed Banks

The Finance Minister, Ken Ofori Atta, has revealed that the collapse of seven banks early this year cost the government a whopping GH¢9.9 billion.

According to him, through government’s intervention in August this year, deposits of some GH¢11 billion have been saved.

In the view of the Minister, some 2,661 jobs in addition to several hundreds were also saved in 2017 from 2 insolvent banks that were closed last year.

It may be recalled that the President Nana Akufo-Addo recently expressed frustration while interacting with the Ghanaian community in Rwanda that after pumping ¢8bn of taxpayer’s money into these banks, its poor liquidity challenges still persisted.

Breaking his silence on the bank crisis, the President said local banks play a very important role in the banking sector.

But was emphatic that he would prefer one “much stronger” indigenous bank in addition to GCB than seven “inefficient poorly managed” indigenous ones. He said the CBG will provide the indigenous leadership needed.

“If our own indigenous banks are performing poorly…at the end of the day, if we don’t take care that is what will happen [ collapse]”, he said. The President stressed local banks are not above the “rigorous” law of free market economics which rewards efficiency.

“The law of the market will have it that, if you are not performing efficiently you will go under”.

From August 2017 to August 2018, seven banks The Beige Bank, uniBank, UT, Capital, Sovereign, Construction and Royal banks have had their licenses withdrawn.

Bankrolled by the government, a new indigenous bank, the Consolidated Bank of Ghana has taken over the assets and liabilities of The Beige Bank, uniBank, Sovereign, Construction and Royal banks.

The Bank of Ghana pumped more than ¢2billion to support uniBank founded by a former governor of the Bank of Ghana, Dr. Kwabena Duffour.

Capital bank also received ¢610m bail-out money from the Bank of Ghana. But of this amount, ¢195m ended up being used to set up the Sovereign Bank. Both banks have now collapsed.

Before this, GCB took over the assets and liabilities of UT and Capital banks.

Retrenchment figures are expected to hit 2,700 by September 2018 as GCB has laid off up to 1,000 former UT, Capital banks while CBG is expected to sack 1,700.

But the Finance Minister during the presentation of the 2019 Budget statement to Parliament yesterday explained further.

“Mr. Speaker, since the assumption of office by the current administration of the Bank of Ghana, bold measures have been taken to restore the health and resilience of the banking sector and to clamp down on unlicensed deposit-taking financial houses. In addition to the two insolvent banks that were closed last year by the Bank of Ghana, five more were closed in August this year for insolvency and other infractions of the law.

“Rescuing the situation regarding these seven banks has, so far, cost some GH¢9.9 billion in monies that Government had not budgeted for and could have surely been put in good use to fix our numerous infrastructural needs, such as housing, roads, bridges, etc.

“The Government has continued to provide assurances to depositors and customers of licensed banks and specialized deposit-taking institutions, through demonstrable actions, that their deposits are safe. Indeed, following the creation of the Consolidated Bank Ghana Limited (a wholly owned Government of Ghana and licensed by the Bank of Ghana as a universal bank), the government capitalized it with GH¢450 million. In addition, Government had to issue a bond with a face value of

“GH¢7.6 billion to cover the gap, between the deposit liabilities and the remaining good assets of the failed banks. This singular action of government has reposed confidence in the banking system because it will ensure that no deposit will be lost, and customers will continue to access their deposits without difficulty.

“Through Government’s intervention in August this year, deposits of some GH¢11.0 billion have been saved as well as some 2,661 jobs in addition to several hundred saved in 2017 from the insolvent 2 banks that were closed in 2017. The Government’s action has also created a strong indigenous Ghanaian bank in place of the five failed banks.”

By: Jeffrey De-Graft Johnson