Let's stop politicizing banking sector reforms – Financial Analyst

Financial Analyst, Dr. Courage Edwards has urged against the politicization of the financial sector clean-up carried out by the Bank of Ghana and claims suggesting it was Finance Minister, Ken Ofori-Atta’s idea. According to him, the decision was rather mooted by the International Monetary Fund to allow the Bank of Ghana to undertake reforms as part of IMF’s conditions. Speaking in an interview with GhanaWeb Business, Dr. Edwards explained that prior to the exercise, the banking sector regulator had also raised red flags among some commercial banks and finance institutions that were heading toward distress levels. “Let me state that the decision to undertake the reforms in the financial sector was mooted by the IMF. Thus, the clean-up was part of the IMF conditions for the country.” “You remember the asset quality review which was executed during the NDC era. The asset quality review gave a sense of the state of the banks. Former Finance Minister Seth Tekper and Governors appointed by President Mahama were aware of the malfeasance which was discovered after the asset quality review of the Banks,” he told GhanaWeb Business. He further explained that during the erstwhile John Mahama administration, the IMF published several reports warning the Bank of Ghana to take some corrective measures within the banking sector. “I think we should stop politicizing the benefits of the banking sector reforms because I believe these reforms have led to stability and confidence in the financial sector” “I can tell you that, some depositors were not getting back their funds from some of the financial institutions. Some of the banks had also breached several banking regulations. Indeed, the financial system at the time, was on the brink of total collapse," he told GhanaWeb Business. "The central bank had clearly explained that the clean-up was based on poor business practices and weak capital positions of the banks and financial institutions. I am aware that the liabilities of some of the banks were more than their assets.” Dr. Courage Edwards made these remarks following a recent statement made by former president Mahama suggesting that Ken Ofori-Atta had proposed and introduced the idea of reforms in the banking sector. “I will say that the resilience shown by the banking sector is due to the comprehensive financial sector reforms that took place before the coronavirus pandemic. You can imagine what would have happened if the banking sector reforms wasn’t done" "We would have woken up one day to see a collapse of the Ghanaian economy and so the measures taken safeguarded the investments of 4.6 million depositors and brought confidence and stability in the financial sector.” the financial analyst concluded. In 2017, the BoG undertook a clean-up exercise that saw the revocation of operating licenses of some eight banks, 23 savings and loans companies and more than 400 specialised deposit-taking institutions (SDIs). According to the Receiver for some of the financial institutions, preliminary investigations found that most directors of the defunct financial institutions failed in their fiduciary responsibilities to customers and other stakeholders. MA/FNOQ Watch the latest episode of BizTech below: