Ken Ofori-Atta, the Finance Minister, has emphasised that government’s intervention to reform the banking sector has saved over 3,000 jobs – adding that deposits held by more than 2.6 million individuals and institutions were also saved.
Presenting the mid-year budget to Parliament yesterday, Mr. Ofori-Atta stressed that without the intervention by government and the Bank of Ghana, the enormous challenges posed to stability of the financial system and the economy at large could have had a far more disastrous impact.
He added that many of the affected institutions had denied depositors access to their deposits for a long period of time, creating liquidity challenges in the financial system and resulting in a high incidence of credit defaults in the system.
With the central bank’s directive for banks to increase their minimum paid-up capital to GH¢400million, which injected fresh capital of GH¢4.2billion into the banks, government has demonstrated its commitment to providing timely relief to depositors whose funds were at risk as a result of the defunct banks and SDIs’ demise.
“Government then set up the Consolidated Bank and capitalised it with GH¢450million to ensure that no depositor lost their deposits. The government of Ghana has had to issue bonds to the tune of GH¢11.2billion to cover costs of the financial sector resolution and protect depositors.
“In addition, the GoG provided an amount of GH¢925million in cash to cover the small depositors of the 386 microfinance institutions – bringing the total cost to GH¢12.125billion,” he said.
He noted that government’s financial interventions in the clean-up exercise were only a stop-gap measure, necessary to help mitigate the socio-economic impacts of the relevant financial institutions’ failure.
“It is imperative we all support the recovery of assets from persons who misappropriated or borrowed funds from those institutions and have failed or refused to pay back, in order that liabilities left behind can be settled.
“To the extent of any recoveries made by the receivers/liquidators of these institutions, government expects to recoup amounts it has spent so far to provide relief for depositors. This will go a long way in enabling government to finance other priorities for our socio-economic growth,” said Mr. Ofori-Atta.
He assured that government will continue to support effective regulation of the financial sector, and expressed confidence that the Financial Stability Council will work assiduously to promote a resilient financial system that supports government’s economic growth agenda.
Over the last two years, the Bank of Ghana has cleaned up the banking and SDI sectors, which involved the revocation of licences from nine universal banks, 347 microfinance companies (of which 155 had already ceased operations) and 39 microcredit companies/money lenders (10 of which had already ceased operations).
These massive failures, according to the Finance Minister, were brought about by several years of an unsustainable licencing regime that lowered standards for entry into the banking and SDI sectors, as well as poor supervision and enforcement from the central bank.