Resilient banking sector will weather COVID 19 storm – Dr. Addison

Inflation, fiscal, debt pressures keep policy rate static again
Photo: Dr. Ernest Addison, Governor Bank of Ghana

Dr. Ernest Addison, Governor of the Bank of Ghana, has said the Bank is working with the industry to build a resilient and sound banking sector capable of weathering the COVID-19 storm in order to quicken economic recovery.

The Governor, who is promising proactive measures to pre-empt potential risks in the sector that maybe brought about by the pandemic shock, said the restructuring efforts undertaken prior to COVID-19 have led to a much stronger banking industry, capable of spurring industrial growth and economic recovery in the face of the pandemic.

He spoke at the 2020 University of Ghana Alumni Lecture in Accra, which was on the topic ‘Pandemic, the Economy and Outlook’, and described the sector as the most crucial in the COVID-19 pandemic shock recovery journey.

While he is anticipating shocks to be felt in the sector, he said the banking industry’s regulator has placed greater focus on identifying early potential risks or warning signals of weaknesses in the sector and initiating prompt corrective actions, as part of efforts to position the industry as the pivot of post-COVID recovery processes and to consolidate the gains.

This, along with other measures for encouraging banks to remain vigilant, upgrading staff capabilities, improving governance and risk culture, he explained, will make the sector resilient and capable of “weathering the storm brought about by the pandemic and ensure soundness of the industry”.

“In ensuring economic stability, the financial sector will get constant regulatory and policy attention to identify and mitigate emerging risks,” he added.

Mitigating NPLs and other risks

Although Dr. Addison acknowledged the resilience exhibited by banks so far in the face of the crisis as commendable, he warned that impacts of the pandemic may result in high non-performing loans and some capital erosion of banks.

He mentioned weaker asset quality, lack of profitability, loss of capital, excessive risk exposure and poor governance as well as liquidity concerns, as some symptoms of a weaker banking system which the central bank is constantly working to identify and alleviate.

He however assured that: “The Bank of Ghana will continue to strengthen all the regulatory measures put in place over the last three and half years to maintain confidence and safeguard the sector,” adding that promoting financial technology will be at the forefront of the bank’s agenda, and it will continue to invest in supportive infrastructure to improve the regulatory framework.

Economic recovery must not leave anyone behind

For his part, Vice Chancellor of the University of Ghana, Prof. Ebenezer Oduro Owusu who chaired the lecture, said government must ensure that its economic recovery efforts do not leave any Ghanaian behind, since the COVID-19 impact has left no one untouched.

“As a university, we are concerned about the job losses and further restrictions that the pandemic and numerous containment measures imposed on the growth drivers of our economy, which limit the chances of our graduates finding decent and sustainable employment. The pandemic literally affected everyone, including churches and other religious bodies. It is my hope, therefore, that economic recovery will impact literally every Ghanaian,” he advocated.

He added that: “As a university, we are equally concerned by the little fiscal space available to government from 2021 and the implications for tertiary education funding; while we also look for the next budgetary realignment underpinned by efficiency and elimination of waste”.

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