Bank of Ghana responsible for collapse of banks - Minority

The minority in Ghana’s parliament have blamed the Bank of Ghana for being partly responsible for the unannounced collapse of UT & Capital bank.

They made the claim during a minority press briefing on the collapse of the two banks on Tuesday

Speaking on behalf of the group, the minority spokesperson on Finance – Cassiel Ato Forson said there were several options available to government on the occasion of a bank’s insolvency.

He pointed out that when financial institutions are faced with excess liabilities against their assets: the government through the central bank can either decide to have it call for more investments from interested stakeholders, have existing shareholders invest some more money in the business (if they have the capacity to) or directly intervene via a stimulus plan to increase the  bank’s Capital Adequacy Ratio (CAI) as opposed to a complete liquidation which he said would ‘negatively affect the economy’.

He further noted that the current leadership of the Bank of Ghana had rather decided to choose the last option: one that involves potential 1500 Ghanaian workers losing their jobs and as a consequence – 1500 homes losing their source of livelihood.

The minority said the UT and Capital bank issue should generate discussions in the country as to “how many banks we [Ghana] really need”.

The minority press briefing and comments reflect the growing level of skepticism across the Ghanaian business and general public over ‘how financial sector performance reports from the Bank of Ghana should be perceived’.  

Below were some highlights of the statement from the minority:

We note that the BOG has approved a “purchase and assumption” (P&A) transaction between UT Bank, Capital Bank and GCB. This can be viewed as a relatively smooth takeover of the banks rather than the earlier speculation of a simple and forced liquidation which would have had a devastating effect on the economy. The P&A transaction follows other precedent approaches that had been used to deal with difficult banking situations in the country, for example, the setting up of the Non-Performing Assets Recovery Trust (NPART), and the winding down of the Bank for Credit and Commerce (BCC) , Bank for Housing and Construction (BHC) and Merchant Bank.

We also note that during the press conference on the P&A transaction, the Governor of the BOG, assured the nation that the approach has a distinct benefit where customers will suffer no losses. The acquiring bank (GCB) will increase its market share while the productive financial assets of UT Bank and Capital Bank will be maintained.

We take note the news and urge all depositors and customers of UT Bank and Capital Bank to exercise restraint while we patiently monitor the activities of the acquiring bank (GCB), BOG, and the receivers (PwC).

We strongly urge these three institutions, (BOG, GCB, and PwC), and the Ministry of Finance (MOF) that could assume any ultimate fiscal risks under the Banking laws, to ensure strict adherence to the distinct benefit of the purchase and assumption (P&A) transaction, so that no single depositor losses his or her investment. Needless to say, should this happen, it will result in an unforeseen burden on taxpayers instead of the original owners of UT and Capital Banks.