When the Bank of Ghana goes to town

In the previous days, the central Bank of Ghana issued what looks like Caesar’s fiat to commercial banks entrusted into its care.

The Bank which behaves like a stubborn landlord who doesn’t visit his tenants without any matter is this time giving an ultimatum to ailing banks who have not met the minimum capital requirement to as matter of urgency brace up immediate recapitalization or risk liquidation.

In the council of elders, everybody knows the King’s tooth is rotten but who will be bold to say it? In the days of old, if you carry a wrong message to a King, you could be killed. It’s not your responsibility to tell the King to focus on the message. It is very common to hear deafening silence of bank managers heads of allied institution so loudly.

This does not mean they are in support with everything the Central Bank does. It is a very difficult thing to do. For analysts and industry observers, one could be blowing away some juicy opportunities in future. Editorial policies are always quoted and rammed into your head all in a bid to make sure one does not step foot on the man as Robert Green admonished: “Never offend the wrong person”.

For a bank like the Central Bank, one could be seriously concerned that when such communications are due for release, the imminent repercussions are properly assessed as it could inflict a seriously devastating injury to banks because the regulator could simply be causing fear and panic amongst depositors which could possibly lead to Bank run.

Many analysts have advocated for a broader and decentralized way of superintending banking operations by the Central Bank in this country. While one may find it that analysts and observers are always calling the regulator names just because they want to hang it, it is only important that the recklessness of these industry players are brought to the fore sometimes for the full appreciation.

For example in the first week of August 2017, a young man at Abossey Okai in Accra contributes to microfinance. He has been paying GHC10 a day for three years. He was promised an interest. He wasn’t consistent with his saving but managed to save about GHC5, 000 with this micro finance company.

He visited on the first 1st August and the company told him he has forfeited his savings. The company could not pay him an interest and his savings had also gone. These and many other reasons analysts and observers always tongue lash the regulator.

While it could be argued a case like this one be laid squarely at the doorstep of such individuals, the regulator can setup a task force to at random investigate some of these cases and imposes serious sanctions. Living it as a mere civil case ends up at police counters and courts which drag for years. This polarizes the system and affects the professional and socially responsible ones.

On the other hand, this visit by the Central Bank where it has also announced a closure of 6000 bank accounts held with commercial banks and consolidates them into single treasury account is timely and Bingo!!! Commercial banks’ investment in treasury bill according to the banking sector report in May 2017 was 72%.

The question one would ask is: what happens to the rest of economic agents if banks which are engineers of flow of capital will decide to hold the majority of cash asset with the central bank in return for money?

Acknowledging the fact the banking policy is prone to risk with a high record of bad debt would mean that portfolio managers be more creative in dealing with clients. This is welcome news.

This could mean that Ghanaians are about to witness some “Real Banking” this time and also experience some creativity of portfolio managers henceforth.
This will culminate in bank support for those small businesses and more collaboration. One can only hope that the Central Bank will not relent in this breathtaking quest of enhancing standards and professionalism.