No back-tracking on minimum capital requirement

A chartered banker, accountant and economist – Dr. Williams Abayaawein Atuilik – recently addressed a one-day practitioners’ forum at KNUST where experienced, practicing professionals spoke to students on relevant topics – and the topic for the day was ‘Corporate Governance and Ethics’.

Dr. Atuilik minced no words when he lay bare that high non-performing loans (NPLs) and poor corporate governance execution are to blame for the recent failure, and subsequent takeover, of banks and financial institutions.

He cited research which indicates that some board members fail to honour loan obligations from the very institutions they are to ensure good corporate governance for, along with failing to perform their fiduciary duties and others.

It thus comes as no surprise that the BoG is being resolute and refusing to budge when it comes to its position on the new capital requirement. This is against the backdrop that a group of local banks made an appeal for the Presidency to intervene and extend the deadline, which is in December this year, to meet the new capital requirement.

Second Deputy Governor of the BoG, Mrs. Elsie Addo Awadzi, made the Bank’s position clear when she met members of the Bankers Association at a breakfast meeting early in the week.  She explained that the central bank’s aim is to build a vibrant banking and financial industry.

For several banks to rely on the BoG’s Emergency Liquidity Assistance (ELA) – as the main source of liquidity due to poor credit risk and liquidity risk management practices – is not sending a good signal of a robust banking sector.

Hence, there will be need to tighten a few screws in terms of regulation to ensure the robustness that the banking sector must of necessity have. The Second Deputy Governor reiterated the BoG’s resolve to strengthen regulation and supervision so as to detect early warning signals of distressed banks in order to take corrective action promptly.

In all this, though, government itself has not been a very good customer since it has been identified that delays by government in paying back loans advanced by banks contributed to some of the problems, including others like the power crisis etc.

We believe the BoG is acting in the best interests of the banking industry, and the members who attended the meeting left reassured that a robust industry is in the best interest of all stakeholders.