A banking analyst, Nana Otuo Acheampong, has said the central bank’s reforms agenda is making local banks stronger and ready to push economic growth, a reason Ghanaians must stop the widespread panic withdrawals of savings.
With their minimum capital increasing from GH¢120million to GH¢400million, the capital available to banks now is about twice what the sector had two or three years ago, a reason the panic situation must cease, Mr Otuo Acheampong said.
“Local banks have the capacity to propel economic growth. In my opinion some of them are as strong as or even stronger than the foreign banks. Going forward, they are also going to ensure that where they lack capacity they will go in and buy that capacity. They will train their people to make sure they meet the challenges ahead,” he told the B&FT in an interview.
“Even if we have a smaller number of local banks, they will now have much more capital to deploy. Formally, some of the local banks had only GH¢60million in stated capital while almost all the foreign ones had at least GH¢120million in stated capital but now everyone has the same level of capital,” he added.
Stop the panic withdrawals
The insolvency of seven local banks has led to depositors moving their savings to foreign owned banks, further worsening the deposit situation of local banks struggling to keep their heads above water.
Dr. Papa Kwasi Nduom, owner of GN Bank, has gone as far as embarking on a tour to educate Ghanaians on why they should stop the panic withdrawals.
Backing the call for calm, Nana Otuo Acheampong said what the Central Bank is doing should rather result in stronger banks capable of safeguarding people’s savings and protecting their investments.
“Since the collapse of these banks, nobody has lost their deposits and chances are, if there is another collapse, you will not lose anything. Just leave your money in the banks because the alternative is no better,” he said.
BoG is not killing local banks
“It is just by coincidence that the seven that fell were local banks but there was never a concerted effort to collapse local banks. That is the reason why after the seven collapsed, there are 14 local banks out of the 30 left and some of these 14 are as strong as, if not stronger than, the international banks.
Poor corporate governance led to doing things that shouldn’t have been done and because this was prevalent in the Ghanaian owned banks, it led to their collapse. If the BoG was bent on collapsing local banks, then all the 14 left should have collapsed. Some, in spite of being Ghanaian owned, have solid corporate governance rules,” he said.
Four pillars to restore confidence
The BoG has introduced four measures aimed at restoring confidence in the sector, including the minimum capital raise to GH¢400million.
It has also introduced a compulsory corporate governance directive, a capital requirement directive, which is an enhanced way of computing capital adequacy ratio by looking at the banks’ risk management, and the Ghana Deposit Insurance Act, Act 931, which was passed in 2016 and amended in 2017.
Nana Otuo Acheampong believes that by the first quarter of 2019, implementation of the act should result in some minimal protection to small depositors.
“The Central Bank has grouped the bank deposit taking institutions into two: Fund A and Fund B. In Fund A, which are the universal banks, it will be guarantee to at least GH¢6250 or the lower of it and the remaining, if there is, will be claimed in liquidation. For Fund B, which is savings and loans, finance houses and microfinance, you will get at least GH¢1250 or less and the rest you claim in liquidation,” he said