CAL Bank MD defends banks’ heavy purchase of T-bills

CAL Bank Managing Director, Frank Adu Jnr, has jumped to the defence of banks for their high purchases of treasury bills issued by government.

Mr. Adu Jr. said those calling for a law to limit how much treasury bills banks can purchase should pressure the government to cut down its borrowings with the issuance of treasury bills.

Economist Dr. Kofi Amoah is pushing for a new banking law that will limit the participation of banks in the treasury bills market.

Dr. Amoah argues that such a law will make available more funds to private businesses instead of to the government.

Other analysts also maintain that the interest government is paying on heavy treasury bills purchased by banks is the main cause of the high interest rate regime in the country.

According Mr Adu Jr, although there may be some basis for such claims, the approach to the issue is wrong.

He said there is nothing wrong with the current banking law, but rather the problem is “government’s appetite”.

“These are not Bank of Ghana notes. These are Government of Ghana treasury bills. So if the government is borrowing it is using the treasury bills approach. We have, even in that market, something called a Private Distributor. The Private Distributor under the scheme must buy a certain minimum amount of T-Bills and that is what the structure is so even though we [banks] have all that holding, I think there are times that we have not hit our minimum amount”.

He said T-Bills issuance by the government is a matter of demand and supply. If government needs money it will issue the bills, and hence that should be the point of focus.

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