Vice President Dr. Mahamadu Bawumia has denied allegations by the opposition National Democratic Congress (NDC) that the governing New Patriotic Party intentionally closed down some nine indigenous banks during the financial sector clean-up.
As part of the banking sector clean-up, the Bank of Ghana (BoG) revoked the licences of nine universal banks, 347 microfinance companies of which 155 had already ceased operations, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, and two non-bank financial institutions.
Some critics including the NDC accused the NDC of witch-hunt in the collapse of some of the banks.
But speaking at the government’s town hall meeting at Kumasi on Tuesday, Dr Bawumia insisted that the indigenous banks were collapsed because they were involved in fraudulent activities.
“They [the NDC] are telling the people of Ghana that they would have kept the indigenous institutions alive even after they had found that they had obtained their licenses in some cases based on false and non-existent capital or after it became obvious that they have siphoned off depositors’ funds and the liquidity support that the Bank of Ghana had provided those institutions. Is their idea of an indigenous financial sector one that is characterized by fraud or unlawful activities?” he questioned.
“A lot of these banks were engaged in fraudulent practices and poor corporate governance and therefore the Bank of Ghana had to take action against them. We cannot say simply because you are indigenous banks, we should allow you to collapse the entire banking system. Nobody takes any pleasure in revoking the license of any institution. It is important to note that all the nine indigenous banks that were closed were to a large extent taken over by two Ghanaian indigenous banks; GBC and CBG. So we are ensuring stronger Ghanaian ownership in the banking sector. Let us note that no bank was closed only on account of not meeting the minimum capital requirement of GHS400million. There were other matters that resulted in the closure.”
Collapse of indigenous banks
On August 14, 2017, the BoG in its press statement announced its approval for the takeover of two indigenous banks, UT Bank and Capital Bank by the Ghana Commercial Bank (GCB).
BoG cited the insolvency of the banks in question, as the major reason for the revocation of their operating licenses.
Consequently, to protect customers, the licenses of the banks were revoked under a Purchase and Assumption transaction with GCB.
Roughly after a year later, on August 1, 2018, the BoG again announced the consolidation of five indigenous banks to form a new bank called the Consolidated Bank Ghana Limited.
The five collapsed banks included Unibank Ghana, Royal bank, Beige bank, Sovereign Bank and Construction bank.
Mahama criticizes clean-up
On the back of this, former President John Dramani Mahama described the revocation of licenses of the financial institutions in the country as harsh and extreme.
Addressing Ghanaians in a Facebook live video interaction, Mr Mahama explained that his government had seen signs that some of the banks were struggling but instead of closing them down, they rather decided to give them a policy and monetary support as well as time to recover.
“When we were in government, the red flag was being waved in the banking sector so we started the processes for bringing things back on track. Unfortunately, we left office before all those measures put in place could crystallise but a new government came to power and I don’t know whether they panicked or whatever happened but certainly the route they took was extreme. It was harsh and I think they have created more harm than they have solved,” he stated.
He further added that he would work to restore the sector if he is voted into power.