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Business News of Monday, 24 June 2019

Source: Myjoyonline.com

Banking crisis: We are out of the woods – Alhassan Andani

The President of the Association of Bankers has assuaged the fears of the banking community that the crisis which led to the collapse of nine local banks is over.

The crises, Alhassan Andani argued, afforded the regulator the opportunity to clean the banking sector of irregular banking practices, and deal with poor management issues.

This cleanup has left in its wake a robust banking sector. “We have seen deposits grow; we have seen loans to the private sector picking up, and a lot of banking products being rolled up by various banks, so back to business and strong.”

He added, “Significantly a lot has changed, the central bank has stepped up supervisions, roles of regulators and monitors have all been stepped up. This is a new regime that did not previously exist.”

Mr. Andani, who is also the Managing Director of Stanbic Bank was speaking on Joy FM’s Super Morning Show Monday Morning.

The Central Bank announced the creation of Consolidated Bank Ghana to take over some struggling banks in the country in 2018.

These banks which run into liquidity challenges were Sovereign Bank, The Royal Bank, Beige Bank, Construction Bank and Unibank.

The operational licences of Heritage Bank and Premium Bank were also revoked by the Central Bank and their liabilities and selected assets also taken over by the CBG.

The Bank of Ghana also revoked the licences of 386 insolvent microfinance and microcredit companies.

These included 192 microfinance companies which had their licenses revoked.

In a release, the bank said these institutions had engaged in several banking infractions which included breach of section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

But Mr. Andani argues that the cleanup exercise by the supervisor is a blessing to the customer as pruning the banking space of risky and overexposed financial institution gives the customer access to credible institutions.

These credible financial institutions which were not affected by the BOG’s reforms were even strong in the midst of the previous messy banking space, Mr. Adani said.

“That performance has been enhanced with a new capitalization, more capital has been brought in, governance has been strengthened and products have been properly aligned,” he pointed out.

These Banks and Microfinance institutions, besides following the rules to ensure that their international reputation is not sullied, made a commitment to make a big difference by the daily decisions they took.

“At the heart of their business practice was people. They ensured that the right people formed the boards, management and manned every significant department of their banks,” Mr. Andani said.

They put the clients first and raised the red flag anytime they were suspicious of bad banking practice, he added

The main banks, he says, “did these things well and took tough decisions.”

According to Mr. Andani, the same cannot be said of the banks that failed.

While he says that he does not “think anybody will set up a business to willfully collapse it, he wants the management of those institutions to take full responsibility for what happened.”

He awaits the outcome of ongoing investigations to reveal the extent of the problem and the culpability of individual directors and managers.

But Mr. Andani says that what happened in the banking “sector was expected. Industry players knew something like that was in the offing.

“We saw the problems coming, it was clear that the industry was not in good shape. We knew from the Asset Quality review that there was a lot to be fixed but we did not. We knew but we were managing it,” he told Daniel Dadzie, host of the SMS.

While Mr. Andani applauded the Finance Ministry for the ‘intelligent’ manner it handled government’ energy and petroleum sector debts, owed these banks which failed, he said government’s failure to pay government contractors who were owing these banks remains a problem.

“The delays in payment weaken some of the institutions. If these debts were paid on time it could have made a massive difference.”