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Friday, September 29, 2023

Collapsed banks breached several banking regulations, reforms not due to political reasons – Financial Analyst

A financial analyst Dr Samuel Dawson, has defended the central bank and the government for reforming the banking sector which led to a robust, sound and safe banking sector.

He indicated that the banking sector reforms undertaken by government and the Bank of Ghana (BoG)strengthened the local banks and made them more resilient to shocks.

Dr. Dawson was responding to Renowned economist Kwame Pianim and other political commentators who have called for the license of banks that collapsed due to political reasons to be restored.

“I can tell you that no political reasons were considered during the reforms.

“I can tell you that, most of the local banks breached several banking regulations.They had governance issues.You had a situation where loans were given to family and friends without proper documentations.Depositors funds were diverted to build businesses of shareholders. Some depositors were not getting back their funds from some of the financial institutions .”

“In fact the financial system at the time, was on the brink of total collapse.”

Poor business practices and weak capital positions of the banks and financial institutions were visibly seen. The liabilities of some of the local banks were more than their assets.

You also had a situation where some of the local banks were just surviving on liquidity support from the Bank of Ghana and putting depositors’ funds at risk.

The Government rather intervened to ensure that customers do not lose their money.

The robustness of the banking sector is due to the financial sector reforms.

The central bank indicated that the reason why most banks were able to withstand increased withdrawals and met depositors’ demand for cash in the lockdown period, was due to the fact that banks were solvent and well capitalised.

“I will say that the resilience shown by the banking sector after the reforms  was due to the comprehensive financial sector reforms that took place before the Coronavirus pandemic. You can imagine what would have happened if the banking sector reforms wasn’t done. We would have woken up one day to see a collapse of the Ghanaian economy. The measures taken safeguarded the investments of 4.6 million depositors. There is confidence now in the sector. The exercise was crucial for stability and confidence in the financial sector”. Dr  Dawson said.

He added “During the NDC era, the IMF  published several reports warning the Bank of Ghana to take some corrective measures within the banking sector, but the NDC government failed to clean up the sector. I think we should stop politicising the benefits of the banking sector reforms.

“We are all monitoring the news on the court proceedings. Some shareholders diverted depositors funds to their benefit. We have heard what is happening in court. Ato Essien is paying for the funds he siphoned. Dr Duffuor and others are all in court. I think we should commend the Bank of Ghana for rather being bold and courageous to undertake the banking sector reforms.”

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