BoG Governor Defends Banking Sector Cleanup: "The Banks Were Operating Like Ponzi Schemes"
- Dr Ernest Addison has justified the controversial 2017 banking sector cleanup and the reshaping of Ghana's fiscal space
- The Governor of the Bank of Ghana noted that the banking industry he had inherited was in his opinion functioning like a Ponzi scheme
- He added that the IMF had also made the sector's cleanup a key requirement for the continuation of the IMF programme he had inherited from the Mahama administration
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The Governor of the Bank of Ghana (BoG) has justified the controversial 2017 banking sector crisis and the actions taken by the central bank to reshape the country’s fiscal space.
In an interview on JoyNews, Dr Ernest Addison stated that revoking banking licenses was critical to restoring stability and confidence in the sector.
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He said he had inherited a banking sector that functioned like a Ponzi scheme, contributing to low confidence in financial institutions.
He said the phenomenon could not have been corrected without the revocation of banking licenses.
BoG Governor highlights malpractices in the sector
Dr Ernest Addison gave a grim glimpse of the situation that had led to the banking sector crisis.
He claimed that some bank shareholders used depositors’ money to run their personal businesses.
He alleged that some funds were also put into brick-and-mortar investments, which weren’t liquid enough to meet withdrawal demands.
He described the malpractices as a total disregard for banking rules and hence the need for the cleanup.
The banking sector cleanup
The banking sector cleanup was triggered by the collapse of UT Bank and Capital Bank in August 2017.
Soon, the Bank of Ghana took steps to revoke the licenses of poorly managed banking institutions, including GN Bank, thus paving the way for stronger and better-governed banks.
Dr Ernest Addison further disclosed that the International Monetary Fund was critical in addressing the crisis.
He noted that he had discovered that the IMF had engaged the Mahama administration, raising red flags about the banking sector crisis. Still, nothing had been done to resolve the situation.
He disclosed that implementing the banking sector cleanup had become a requirement to continue the IMF programme when he took office.
BoG boss is proud of the cleanup
Dr Ernest Addison said that despite all the controversies that had arisen as a result of the cleanup exercise, he was proud the BoG had achieved such an admirable feat.
He noted that the BoG received an international award for the effective cleanup process, and the sector has since drastically improved.
He said the remaining banks are well-capitalised and comply with stronger corporate governance standards.
He said they are also well-managed and supervised.
BoG justifies revocation of GN Bank's license
YEN.com.gh reported that the Bank of Ghana revealed why it revoked GN Bank’s banking license in 2019.
In a memo responding to claims raised by the Global Chairman of Groupe Nduom, Papa Kwesi Nduom, the central bank stated that the revocation of GN Bank’s license was justified.
It explained that the bank had been involved in several significant regulatory breaches that threatened its operational stability, making it a risk in Ghana’s financial sector.
The BoG stated that calls for restoring GN Bank’s banking license are untenable and would not be considered under the circumstances.
The central bank referred to a statement it issued in August 2019 detailing the reasons for its license revocation, including capital inadequacy, liquidity, governance, and risk management requirements.
Proofread by Samuel Gitonga, Copy Editor at YEN.com.gh
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Source: YEN.com.gh
