The Ghana Chamber of Commerce and Industry (GNCCI) has expressed worry over the panic withdrawals which have hit the banking sector, saying they could make it difficult for banks to advance loans to businesses.
“Ghanaian financial institutions practice fractional reserve banking. This means that they are only required to hold reserves equal to a fraction of their deposit liabilities.
“The rest of the deposits they receive are given out as loans. No financial institution is therefore able to pay all its deposit liabilities on demand,” President of the chamber, Nana Dr. Appiagyei Dankawoso I, said at a press conference.
Customers of banks, he said, should desist from withdrawing their deposits out of fear, since their monies are safe in their respective banks.
Indigenous banks have, especially, seen a lot of panic withdrawals following the liquidation of seven of them – and the fact that government stepped in to ensure depositors do not lose their savings has done little to stop the panic-withdrawals.
“The continued panic-withdrawals in financial institutions will essentially undermine our collective efforts at building a safe, sound, and secure financial sector,” said Nana Dr. Appiagyei Dankawoso I.
He noted that the continuous withdrawal of deposits will affect the private sector in particular and economic growth in general, since lending to Small and Medium Enterprises (SMEs) – the backbone of the economy – will dry up.
“The chamber wishes to assure the private sector that it is engaging government, the Bank of Ghana and other relevant stakeholders to ensure a safe, sound, supportive and stable financial sector,” he said. “This will essentially provide affordable long-term credit to enable businesses grow and create jobs. Let us all support the financial sector to ensure a prosperous and resilient economy.”
In the last 12 months, the banking sector has seen dramatic changes – including the revocation of seven indigenous banks’ universal banking licenses; the introduction of new corporate governance, credit and risk guidelines; and an increase in the stated minimum capital of banks from GH¢120million to GH¢400million, with a December 2018 deadline.
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.
Governor of the central bank, Dr. Ernest Addison, recently debunked suggestions that the banking sector is in crisis. According to him, about 90 percent of industry players are operating and functioning normally.
“When people talk about banking crisis, then it is an exaggeration. Ninety percent of the industry is operating as normal. That, I think, is a message that has not been properly articulated. Secondly, also, the indigenous banks are relatively stable. The indigenous banks that are having problems are those that are perceived to be badly-managed, with major corporate governance issues. So, the industry is fairly robust,” he said.
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.