Banks and other financial institution should learn a lesson from the collapse of UT Bank and Capital Bank to streamline their credit operations.
That’s the caution from Economist at the University of Ghana Business School, Prof Godfred Bopkin who believes it is high time financial institutions follow proper procedure in lending out money.
The Bank of Ghana on Monday announced a Purchase and Assumption transaction with GCB Bank Ltd that transfers all deposits and selected assets of UT Bank Ltd and Capital Bank Ltd to GCB Bank Ltd.
A statement from the Central Bank said the action has become necessary due to severe impairment of the capital of the two banks. The main offices and branches of UT Bank and Capital Bank will now be under the control of GCB bank and will be opened at 1pm today (Monday) for normal business transactions and a remedy to the possible departure of affected banks clients.
Read also:Â UT Bank and Capital Bank go bust, acquired by GCB Bank Ltd.
UT Bank gained recognition in the banking industry with its product “loan in less than 48 hours†which churned out substantial amount of loans to the business community and the public within 48 hours after application.
It is believed the bank has been unable to recover a significant portion of the loans due to its inability to conduct proper credit checks on clients, leading to a high default rate. Liquidity has also been locked in confiscated assets such as vehicles and houses of defaulting clients.
Speaking in an interview on JoyFm, Prof Bopkin observed there is a lot of competition among financial institutions to sell products, especially loans, and this has resulted in many of the institutions side-lining due processes in the determination of the viability of the loans.
He continued that the development should be a lesson to banks, other financial institutions. Customers should also be very careful which bank they transact business with, He concluded.
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