Few days ago, I read a news item which was attributed to the renowned motivational speaker and counselor Uncle Ebo Whyte in which he expressed emotional sentiments regarding how a section of society seemed happy due to the revocation of the licenses of UT/Capital Banks in addition to the recent ones-Beige Bank, Construction Bank, Sovereign Bank, Royal Bank and the uniBank for various regulatory offences. Seriously as his opinion was headlined, “Ghanaians should be mourning” instead. Is the joy of those people borne out of their personal grudges with the banks’ controlling shareholders or wedged in some other deep-rooted differences? What are the direct benefits if any to those persons from the banks’ collapse?
I wished we could all take the time and do deep introspection to appreciate all the intricacies of the issues. This will help us to understand their implications on the economy and our lives. In that respect, we would conclude that there are no laughing matters and the daggers in those smiles be blunt. I would attempt to flip the pages of the problems’ resultant effects on our hands.
Meanwhile, banks in any country have interdependent or counterparty relationships with other ones. These relationships take many forms including but are not limited to placing investments with them, handling syndicated transactions, over-night borrowing to shore up liquidity and cross-border transactions. These legitimate relationships help banks to sustain their operations for their mutual benefits to drive economic development. In the same vein, a problem in one bank has its direct rippling effects on the other ones as well as the economy and lives. For instance, a cursory look at the “controversial” KPMG 278-page report on uniBank revealed that the bank is exposed to five banks in the country.
In order not touch the hornet’s nest, I am silent on those bank’s names but uniBank’s gross exposures to them are -Bank A (Gh¢394 million), Bank B (Gh¢293 million), Bank C (Gh¢255 million), Bank D (Gh¢203 million) and Bank E (Gh¢181 million) aside from the bank’s exposure to external lenders. Since the revocation of uniBank’s licence, the immediate action these financial institutions took involved re-classifying the status of these debts in their loan registers as delinquent (non-performing loans). The other six (6) banks have similar problems with counterparty financial institutions.
These non-performing loans could erode the bank’s existing capital base. The contagion effect is that the current gains to the creditor banks can be heavily impaired and attract similar regulatory actions. As a result, the country’s financial sector could melt down and expose us to the naked realities unless the intervention by way of the bond issuance absolves the debts early enough to give the creditor banks a healthy financial position or breathing space.
The bond issuance for the purchase and assumption to the tune of Gh¢5.6 billion (for the five banks) in addition to the UT/Capital Banks’ Gh¢2 billion amounting to Gh¢7.6 billion also becomes a hanging albatross of debts on our necks to offload as taxpayers? Are we ever-ready to be suffocated with more taxes? It concerns you, it concerns me. It concerns everyone. These are no laughing matters even the “ever ready” batteries (cells) we use during “dumsor” weaken over time. We should not lose sight of the fact that some banks are in dire need of extra funds in their bid to meet the new minimum paid up capital of Gh¢400 million. Every pesewa counts. It is at these moments that cool heads should prevail to overcome the debacle which has the potential to derail the country’s economic growth and development. Should we in these circumstances engage in fiddling while Rome burns? No laughing matter!
Economic Growth & Development
The private sector of the country’s economy has over the years been touted as the engine of economic growth and, therefore, requires banks’ support. It is indeed, the sector which creates jobs and absolves most of the active working class including the self-employed individuals who provide ancillary services to the formal private institutions. But with the current developments in the banking sector, job insecurity has been heightened. Since the liquidation of the seven (7) banks, many workers have been laid off which worsens the unemployment situation. In effect, as a country, our standard of living is likely to drop. This is no laughing matter! Can insurance companies provide a cushion in times like this?
Job Loss Insurance Benefits
It is worth advancing the point that much has not been heard of job loss insurance products in the insurance industry. With the burning issues of employment instability in the country, insurance companies should seize the opportunity to develop such products or create awareness on the products (if any). A job loss insurance policy should normally cover cases of retrenchment or complete involuntary separation from employment. Thus, the policy should provide for such other issues including the lay-off, unionised labour disputes, dismissal without cause, a legal strike or even a lockout.
Alright! We have heard a lot of information relating to the incidents which collapsed the banks. We must learn our lessons from them. Weak corporate governance is no laughing matter! Excessive risk-taking and disbursing loans without the normal procedures is no laughing matter! Violating banking laws is no laughing matter. Panic withdrawals resulting from the collapsed banks is no laughing. Job loss can kill, and this is no laughing matter. No laughing matter is no laughing matter. This is no laughing matter!
Thank you for reading; God bless!