The Finance Minister, Ken Ofori-Atta, has thrown down the gauntlet to banks to aggressively support businesses to create more jobs, after government undertook a comprehensive banking reform and clean-up exercise that has led to the current stable environment.
“As a result of the bold and decisive measures we took to fix the banking crisis, our banks are stronger and richer; and, with the cost of borrowing dropping, banks can and should therefore do a lot more to support the growth and expansion of business, which will create more jobs under the stable environment that has been provided by government for that exercise,” he said.
Speaking on the floor of Parliament, Mr. Ofori-Atta – the investment banker-turned politician, stressed that the foundation for growing businesses and creating jobs everywhere is a vibrant, well-governed, well-resourced, competitive financial services sector, operating under a stable economic regime.
“That is why we could not watch the sector collapsing, even if it meant slowing down for a year or so on some of our own scheduled programmes,” he added.
The recovery process has seen a total of GH¢12.1billion so far spent to secure the deposits of nine insolvent universal banks and 386 microfinance institutions, with an announcement for the savings and loans and finance houses imminent. Also, the process saw the establishment of Consolidated Bank – with a stated capital of GH¢450million – which the Finance Minister said released a total of GH¢530million to Cocobod for cocoa roads.
The reforms also led to creation of the Ghana Amalgamated Trust (GAT), which Mr. Ofori-Atta noted has provided funds to capitalise solvent indigenous banks that were struggling to meet the enhanced minimum paid-up capital of GH¢400million.
Since the increment in banks’ stated capital from GH¢120million to GH¢400million, the 23 surviving banks have injected fresh capital of GH¢4.2billion into the industry, which has played a significant part in pushing the entire industry’s total asset base up by 12 percent to stand at GH¢112.8 billion, with total deposits also increasing by over 22 percent between June 2018 and June 2019.
“We have restored confidence into the banking system, securing the otherwise distressed deposits of some 2,655,100 customers as well as saving over 3,000 jobs. Growth of credit to the private sector is rebounding assuredly – by 16.8 percent in June 2019,” Mr. Ofori-Atta added.
He opined that with the sector rebounding, banks are now poised to deploy their newly-injected capital toward financial intermediation to aid the development process; pointing out that asset quality has also improved, as reflected in the declining Non-Performing Loans (NPL) ratio from 22.6 percent in June 2018 to 18.1 percent in June 2019.
“It is gratifying to note that these regulatory and policy measures undertaken to clean up the financial sector have already begun to bear fruit. I am therefore happy to announce, confidently, that Ghana is seeing the revival of that zealous, responsive, and at the same time responsible, banking environment we had been reduced to reminiscing about,” he said.
Slow liquidation process but progress being made
The finance minister pointed out that liquidation of the defunct institutions is progressing, albeit with impediments from persons whose unlawful actions were associated with the failure of those institutions having the audacity to seek legal cover.
He added that the interventions by government in the clean-up exercise were only a stop-gap measure, necessary to help mitigate the socio-economic impacts from the relevant financial institutions’ failure. It is imperative, therefore, that Ghanaians 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 on providing relief to depositors. This will go a long way in enabling government to finance other priorities for our socio-economic growth.”
He assured of government’s continuous support for effective regulation of the financial sector, adding that there is confidence in the recently established Financial Stability Council to work assiduously on promoting a resilient financial system that supports Ghana’s economic growth agenda.
“We are also fully committed to supporting operationalisation of the Ghana Deposit Protection Scheme in September 2019 to further protect the interests of depositors.”