PricewaterhouseCoopers (PwC) has presented its report on the impact of COVID-19 on the country’s banking sector, and announced that banks should brace for substantial credit losses, increased cybersecurity challenges, and increased cost in keeping employees safe while the pandemic ravages the economy.
The report paints a grim outlook for the industry, especially its operations and profitability, in spite of measures put in place by the Bank of Ghana to cushion impacts of the virus on the financial sector.
PwC notes that sectors like trade and commerce, hospitality and leisure, construction, oil and gas, education, transport and storage, and financial and insurance activities will be hardest hit and cause a general slowdown of economic activity – which will result in heightened risks in the banking sector which will reduce fee and trading income, as well as put pressure on net interest income; and higher credit losses and the attendant impact on overall asset quality, capital and liquidity.
To mitigate these risks, PwC has proffered some priority areas banks should focus on such – as crisis response and management, which will develop reasonable and worst-case scenarios and their potential impacts to support crisis and response planning.
And on revenue, the report advises banks to revise their sales strategy to deal with evolving customer behaviour and competitive environments (risks and opportunities), and also prioritise actions to protect customer relationships and commercial interests.
The Bank of Ghana introduced certain measures to cushion banks from some losses that will hit the industry resulting from the pandemic, including reduction of the Primary Reserve Requirement from 10 percent to 8 percent to provide more liquidity to banks and SDIs; as well as reduction of the Capital Conservation Buffer (CCB) for banks from 3 percent to 1.5 percent.
The Bank of Ghana also ordered banks and Specialised Deposit-Taking Institutions (SDIs) to suspend the declaration and payment of dividends or distribution of any reserves to shareholders, to ensure that banks and SDIs are better able to support their customers throughout the COVID-19 pandemic.
Cabinet has come out of a three-day retreat to review the economic impact of COVID-19, and we are expecting a revision of targets set in the 2020 budget by government prior to COVID-19’s impact. We believe these should be amply captured in the mid-year review budget statement for possible adoption by Parliament.
COVID-19’s sudden outbreak has prompted a revision of targets and projections.