- The Governor of the Bank of Ghana (BoG) says the decision to collapse local banks was a difficult one
- According to Dr. Addison, he took the drastic action in the larger interest of the banking sector and the economy
The collapsing of five indigenous banks was a “painful” decision, Governor of the Bank of Ghana, Dr. Ernest Addison had said.
The Governor said it was difficult to collapse the banks, especially when he has a close relationship with the Managing Directors of the some of the banks.
Last Wednesday, the Central Bank announced that The Royal Bank, Sovereign Bank, The Construction Bank and Beige Bank have been merged to form The ConsolidatedBank of Ghana Limited.
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The BoG explained that the five banks were merged in order to “ensure that the banking sector maintains a strong indigenous presence”.
Dr. Addison, however, insists such a drastic decision needed to be taken with sights on the larger interest of the banking sector and the economy.
Addressing a gathering at the 18th Working Luncheon of the Ghana Association of Bankers (GBA), he explained that merging the five banks was done to ensure “stability in the financial system”.
He pointed to the Managing Director of Royal Bank, Osei Asafo-Adjei, as one person he was very close to.
“He is a personal friend and colleague and I was in Cambridge University with him. But he happens to be a Managing Director of a bank that I had to dissolve,” the BoG Governor said.
“Underpinning these rather unpleasant but needful decisions to ensure stability in the financial system was a series of infractions including, license acquisition by false pretences, inadequate capital, high levels of non-performing loans owing to poor liquidity and credit risk management controls, and above all weak corporate governance structures,” he added.
He further stated that although pockets of weaknesses remain, the financial soundness indicators of the banking industry have broadly improved.
Dr. Addison also touched on support for indigenous banks, assuring that the Central Bank will provide financial support to other indigenous banks to meet the new capital requirement of GH₵ 400 million.
He was, however, quick to add that “such support will be limited to indigenous banks that are solvent, well-governed and managed and in full compliance with the Bank of Ghana’s regulatory requirements”.
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