Minority plans to set-up Financial Sector Conduct Authority

The Minority in Parliament are proposing the setting-up of a Financial Sector Conduct Authority (FSCA), aimed at regulating market conduct and promoting consumer education in a bid to ensure a strong and well-regulated banking and financial sector.

According to Isaac Adongo, Member of Parliament for Bolgatanga Central & Member of the Finance Committee of Parliament, the next NDC government – should the opposition win the 2020 elections – will set up an Authority that will be expected to implement further regulatory reforms to enhance the Bank of Ghana’s functions while establishing a Financial Sector Conduct Authority to regulate market conduct and ramp-up consumer education.

Addressing a press conference in Accra on Tuesday, on recent developments in the banking and financial sector, the Minority – led by its spokesperson, Isaac Adongo – maintained that: “We will push ahead with the financial inclusion and innovation agenda by setting up an appropriate authority to regulate microfinance and allied sectors, while developing the rural banking system and enhancing the role of ARB-APEX Bank’s supervisory structure”.

Furthermore, the Minority added that the banking sector is reeling under the strain of implementing IFRS9 – because the recapitalisation process ignored the cleaning-up of banks’ balance sheets that would have been achieved if they had implemented ICAAP.

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“What we are seeing is erosion of these banks’ capital through write-off of toxic loan assets on their books, which could lead to another round of recapitalisation. The banks are struggling with weakening liquidity as measured by the BoG liquidity indicators.

“Core liquid assets to total assets has deteriorated from 26% after recapitalisation to 23.9%, while core liquid assets to short-term liabilities has deteriorated from 34% after recapitalisation to 30.6%.

“These are very worrying signs, especially given the level of panic-withdrawals in the financial sector. What this means is that for every cedi short-term liability (such as customer deposits), the banks have cash or liquidity to cover only 30 pesewas.  This is clearly worrying.”

GH¢2.7bn lent to businesses

“The banking sector has been able to lend only GH¢2.7billion to businesses and households since January to June 2019. This means an average of GH¢450million loans a month,” the Minority noted.

“No wonder businesses are struggling to raise funds to expand their operations and create employment for the teeming unemployed youth,” Isaac Adongo stated.

According to the Minority, it would have been cheaper to address the challenges from their roots while keeping jobs for our people, without government having to spend GH¢23billion to put people out of work.

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“We believe that government should have spent just a fraction of this money to pay off the energy sector debts to the banks as well as contractors. That would have saved several of the collapsed banks which were owed a lot of money by government contractors and energy sector SOEs.

“The banking sector’s performance since January 2019 (after the so called reforms) shows a weak and struggling financial sector. The capital adequacy of the banking sector has deteriorated from 21.8% in January to 19.1% in June 2019.

“Capital adequacy as measured by Basel II/III has worsened sharply from 17.5% in January to 16.3% by end of June 2019.”

The Minority also called for amendment of the Banks and Specialised Deposit-taking Institutions (BSDI) Act 930 (2016), for which they argue the framework has not been applied well.

On the revocation of banks’ licences, they also indicated that they will support plans to freeze new bank licences for a period of time while getting as many banks as possible to list on the Ghana Stock Exchange. We find laudable the idea of looking at the Receivership and Liquidation framework in the Act – to make it easier for the Administrator to reverse a decline rather than making it automatic for an insolvent bank to be liquidated.

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