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Business News of Monday, 27 July 2020

Source: www.ghanaweb.com

Most of the collapsed banks were 'Ponzi schemes' - Ofori-Atta

Finance Minister, Ken Ofori-Atta Finance Minister, Ken Ofori-Atta

The Finance Minister, Ken Ofori-Atta has said that most of the collapsed banks and financial institutions that became insolvent due to the financial sector clean-up exercise by the Bank of Ghana in 2017, were found to be ‘ponzi schemes.’

According to him, before the takeover of the collapsed banks by the BoG, some managers and directors of the banks were literally bankrupt yet were taking depositors' funds and loaning them back for regeneration.

Speaking in an interview on Accra based, Asaase Radio on Sunday, July 26, Ken Ofori Atta said; “When we got into office in January 2017, one of the documents that were called the Assets Quality Review of the banks showed most of these banks were literally bankrupt and therefore they were ‘ponzi schemes’ taking people’s money, loaning them to people and just regenerating them.”

“We [Finance Ministry and the Bank of Ghana] also realized that about 4.6 million depositors were then at risk and we just knew the debilitating effect in which the banks really created havoc and so there had to be a re-calibration of all systems and so do you wait for it explode or do you take decisive action?” he quizzed.

Mr Ofori Atta, however, indicated the government has so far spent close to GH¢20 billion to keep some of the banks from total collapse, adding government did not conspire with the BoG to cause the collapse of some banks as suggested by some.

As part of its efforts to restore confidence in the banking and specialized deposit-taking sectors, the Bank of Ghana (BoG) embarked on a clean-up exercise in August 2017 to resolve insolvent financial institutions whose continued existence posed risks to the interest of depositors.

The clean-up saw the revocation of licenses of 9 universal banks, 347 microfinance companies, 39 micro credit companies or money lenders, 15 savings and loans companies, 8 finance house companies, and two non-bank financial institutions.

The move by the central bank was a comprehensive assessment of the savings and loans and finance house sub-sectors carried out by the BoG in the last few years after it identified serious breaches.