Bank­ing bust

The Africa Report - - COUNTRY FOCUS -

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.

JOB LOSSES

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

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