You are here: HomeBusiness2018 08 25Article 679470

General News of Saturday, 25 August 2018

Source: Myjoyonline.com

BoG’s ‘incoherent’ policy measures blamed for bank failures

Honorary Vice President of Imani Africa, Bright Simons, has faulted Bank of Ghana’s policy measures as contributing significantly to the banking crisis.

Speaking on news analysis programme, Newsfile, on Saturday, Mr Simons said the policy measures of the central bank failed the test of logic and threw the sector into chaos. The policy measures of the central bank include the tools and directives which it uses to map out the implementation of banking regulations.

“We have had a trend where the Bank of Ghana’s policy measures does not appear to be sufficiently coherent. So at the same time that [Bank of Ghana] was promoting asset review – and clearly we were seeing evidence that banks were incapable of deploying their capital productively and profitably – they were at the same time promoting asset inflation through high minimum paid-up capital which is not the same as Capital Adequacy,” he said on Newsfile.

The respected member of Imani Africa, a think tank, explained that a proper approach to ensuring sustainable Capital Adequacy would be for the Bank of Ghana to link a universal bank to the quality of its assets.

According to him, the Bank of Ghana’s new minimum paid up capital of GHS400 million to all universal banks is too high and does not take into consideration the different dynamics in the banking sector, such as invested capital and their associated risks levels.

Mr Simons and two other panellists -- Ace Ankomah and Dr Nana Atuo Acheampong -- were on the news analysis programme Saturday to discuss the recent dissolution of five local universal banks over various breaches of banking regulations. The Bank of Ghana had closed down two banks last year over a similar reason.

The Bank of Ghana revoked the licences the Royal Bank, Beige Bank, Sovereign Bank Limited, Construction Bank and uniBank Ghana Limited, explaining that apart from severely liquidity inadequacy, some of the banks even procured their operational licences through dubious means.

Panic withdrawals have hit some financial institutions following revelations that financial misappropriation by some top officials of the collapsed banks contributed to Bank of Ghana clampdown.

The government has meanwhile, said it is taking steps to control the situation.

Many have hailed the move as timely and critical for sanitising the banking sector, however, others say the Bank of Ghana itself contributed significantly to the crisis.

Financial reporting

Mr Simons has urged the Bank of Ghana to review financial data in the sector, warning until that is done policy decisions would face challenges.

"It is quite evident that the financial data within the system is almost unreliable. And it was about time that the Bank of Ghana undertook a comprehensive review of financial data on which it is relying on to regulate the financial sector, particularly the banking sector in this country," he admonished.

Watch more in the video below