Some financial analysts have backed the decision by the Bank of Ghana to consolidate five local banks into a single entity.
The merger of the five banks – Beige Bank, Construction Bank, Royal Bank, uniBank and Sovereign Bank – into the Ghana Consolidated Bank Limited by the BoG was attributed to various reasons including claims that some of them obtained licenses under false pretences.
Speaking on Eyewitness News on Wednesday after the Central Bank’s announcement, banking consultant Nana Otuo Acheampong, stated that the consolidation will go a long way to bring some certainty into the banking system which was suffering from a severe lack of confidence.
“The banking sector is getting certainty. What was happening was that uncertainty was creeping in, right from the onset and people were not sure which banks were going to meet the minimum capital requirements.
What the regulator has done is to bring a semblance of certainty because the government has put in a 5.6 billion bond to save those banks so now they are all on firm ground. It’s not a pruning exercise but it’s an exercise to put the sector on a strong footing.”
He added that it would have been unrealistic to expect all the banks in the country to remain standing after the introduction of the minimum capital requirements, as other countries had seen significant reductions in the number of banks operating after a similar exercise.
“All along, my stance has been that we can’t start with 34 and end up with 34 banks. This is not the first time this has been done. In Nigeria, they had 89 banks, when they did the recapitalisation, they ended up with 22 or 23 banks. Malaysia had 80, when they did their recapitalisation, they ended up with 12.
So it was a far cry to start with 34 and expect to end with 34. The consolidations were expected.”
“Bitter pill we need to swallow”
A risk and banking analyst, Samuel Okyere, stated that despite the collapse of the five local banks, there was no need for the public to panic as the sector was not in crisis.
He added that panic withdrawals by customers could create more challenges for the sector.
“News like this is likely to cause panic. I would like to emphasize that there’s no need to panic. The banking industry is nowhere near crisis. What is happening is a reformation, it’s reconstruction but it’s nothing close to a crisis. It’s important that people relax and understand what’s going on.
It’s extremely important because sometimes, some of these things are likely to cause people who do not understand the exact issues at stake to go and withdraw which could cause bigger problems. It’s important that any expert who speaks on this, emphasizes the fact that to someone who knows what exactly is happening, it’s not unexpected.”
Mr. Okyere believes that a few more banks might face the same fate but insisted that this was necessary to sanitise the system.
“There are still quite a number of banks on the way. But this sanitation is perhaps needed. It’s a very bitter pill that should be swallowed.”
Making the announcement at a press conference on Wednesday, the Bank of Ghana boss, Dr. Ernest Addison said Consolidated Bank Ghana Limited was assuming “all liabilities of these five banks.”
“The government has also issued a bond of GHc5.76 billion to cover the gap between the liability and assets assumed by the Consolidated Bank,” he added.
Dr. Addison stated that there was a grand plan underlying this merger as “the Consolidated Bank Ghana Ltd is expected to play a strategic role in the transformational agenda of the government.”
GHc400 million capital requirement struggle
The Bank of Ghana gave the banks in Ghana until the end of 2018 to raise a GHc400 million new capital requirement or risk being shut down or becoming a microfinance or savings and loans institutions.
Whereas the foreign-owned banks are not complaining, the local ones had asked the Bank of Ghana to give them some time to recapitalize.
They also petitioned the Presidency to intervene on their behalf.
But the central bank among other things advised them to join forces and recapitalize or risk having their licenses revoked.
The Governor of the Bank of Ghana, Dr. Ernest Addison about a week ago disclosed that some 15 banks are set to meet the new minimum requirement which meant that 19 others would have to resort to various options available to them in order not to miss the deadline.
GN, Sahel and Premium banks to merge
Three local banks — Premium, GN and Sahel Sahara banks have already agreed to merge.
The three banks according to reports, commenced the merger talks this year and finalized the deal this month- July 2018.
The deal is however yet to be approved by the central bank which has received the proposal.
If approved, it will be the first merger which will be undertaken by local banks as part of moves to meet the minimum capital bank.
Capital, UT bank collapse
The Bank of Ghana announced the collapse of UT and Capital banks about a year ago, allowing GCB Bank to take over the two insolvent banks.
In March 2018, the central bank again announced that indigenous bank; uniBank,was also on the verge of collapse, and was taken over, with audit firm, KPMG Ghana as the administrator.
Again, in May 2018, BoG announced the appointment of an adviser to directly supervise operations of Sovereign Bank which the central bank claimed faced governance and capitalization challenges.
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By: Edwin Kwakofi/citinewsroom.com/Ghana
