Despite the trauma and job losses caused by the failure of several small Ghanaian banks, the sector now looks stronger with credit growth likely to accelerate
Ghana is slowly emerging from its worst banking crisis ever. Several times this year depositors massed in the branches of insolvent banks wanting to take their cash, despite assurances from central bank governor Ernest Addison that their money was safe. Some fixed-term depositors even approached the newly formed Consolidated Bank to redeem their investments, unsuccessfully. Panic withdrawals also hit local banks that had not been declared insolvent, such as Premium Bank, GN Bank and Heritage Bank, as customers speculated the banks would soon be closed down. So serious was the situation that the founder of GN Bank, former minister of state and flagbearer of the Progressive People’s Party Paa Kwesi Nduom, went on public campaigns telling people to stop the panic withdrawals. Ghana’s central bank closed down seven banks in the 12 months leading up to August 2018 due to rising non-performing loans and the lenders’ inability to meet capital adequacy requirements. It revoked the licences of UT Bank and Capital Bank in August 2017, after providing a combined ¢1.5bn ($310m) in liquidity support. A year later, it followed with Beige Bank, Construction Bank, Sovereign Bank, unibank and Royal Bank. In all cases, the Bank of Ghana noted negligence on corporate governance procedures and/or disregard for provisions of the banking law. Former bank directors have been assisting the Economic and Organised Crimes Office in investigations to unravel the causes of the bank failures. The founder of unibank, former finance minister Kwabena Duffuor, is challenging the lender’s closure in court. Whil e s e v e r a l s mal l banks have recently collapsed, the majority of the sector has already met new minimum capital requirements designed to strengthen the industry. Those banks now have more firepower to lend to big and small companies in the sectors that will be driving the economy forward.
To protect depositors, the Bank of Ghana named GCB Bank and the newly created Consolidated Bank Ghana to take over the liabilities and selected assets of the defunct banks. The government has stepped in, but its means are limited, as it is coming to the end of a programme with