Bank cleanup could reduce interest rates, enhance financial inclusion – Economists

Business News of Monday, 14 January 2019

Source: goldstreetbusiness.com

2019-01-14

Governor of the Bank of Ghana, Dr. Ernest Addison

Economist, Prof. Peter Quartey of the University of Ghana expects a drop in interest rates following the sanitisation of the banking sector by the Central Bank.

Universal Banks operating in the country were given up to December 2018 ending to raise the new minimum capital requirement of GHc400 million or be downgraded to a Savings and Loans entity if their corporate governance structure was above board.

Prof. Quartey further reckons that non-performing loans (NPLs) on the books of banks will also drop as the new regime will compel banks to give credit to individuals and businesses who are credit worthy.

He was positive the intervention from the Bank of Ghana prevented the situation where one woke only to hear his or her bank had collapsed as happened in the 1980s.

Meanwhile another economist, Dr. Lord Mensah is of the view that if financial inclusion remains poor regarding the operational reach of banks, the sanitation of the banking sector wouldn’t have been complete.

He asserted that the situation where banks focus operations in Accra, Kumasi and Takoradi leaving other areas unbanked must change to enable equitable economic growth.

“Financial Inclusion triggers economic growth so the banks must get out their comfort zones,” he submitted adding, “the cleaning up of the sector should not only be about reducing the number of banks from thirty- six to twenty-three banks but also client outreach is crucial.”

According to Dr. Addison, the Bank of Ghana governor, sixteen banks met the new paid-up capital requirement of US$81 million mainly through capitalization of income surplus and a fresh capital injection while other banks went through a process of merging with the BoG’s approval.

The merged banks are: First Atlantic Merchant Bank Limited and Energy Commercial Bank, Omni Bank and Bank Sahel Sahara and First National Bank and GHL Bank.

State-owned banks (Agricultural Development Bank and National Investment Bank) benefited from a support scheme from the government branded the Ghana Amalgamated Trust (GAT). Omni Bank/ Sahel Sahara, Universal Merchant Bank and Prudential Bank benefited from the GAT financing initiative on the basis of their solvent status and good corporate governance systems.

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