Governor of the Bank of Ghana (BoG), Dr. Ernest Addison has disclosed that the financial sector clean-up exercise which led to the collapse of some financial institutions remains incomplete.
He specifically notes that some troubled savings and loans companies under scrutiny are still in operation despite being up for licence revocation.
The Governor explains that the main reason for the delay in revoking these licences is the lack of budgetary resources to refund depositors after such revocations insisting that the financial constraint has hindered the continuation of the clean-up process.
“Some of the savings and loans companies are still in trouble as I speak, but their licences have not been revoked. Their licenses have not been revoked, and the reason is simple. The government does not have the resources to refund the deposits to the depositors”, Dr. Addison in an interview with Joy News’ PM Express Business Edition said.
The banking sector clean-up was initiated to restore stability and confidence.
It saw numerous financial institutions lose their licences due to insolvency and regulatory breaches.
However, the inability to address depositor claims for savings and loans firms has slowed progress on this front.
Dr. Addison admitted the need for adequate funding to complete the exercise to safeguard the interest of depositors while advancing the broader goal of a stable and reliable financial sector.
“This is an issue that has been part of our discussions with the IMF. Once the budgetary issue is resolved, that problem will be taken care of. We have been waiting for three years to get budgetary resources to be able to refund depositors after liquidating the savings and loans companies, but so far budgetary resources have not been made available”, the Governor added.
Between 2017 and 2020, Ghana underwent a major overhaul of its financial sector, leading to a significant transformation of the banking industry.
The number of banks was reduced from 34 to 23 while licenses for 347 microfinance institutions, 15 savings and loans companies and eight finance houses were revoked as part of the reform process.
Key measures included the creation of the Consolidated Bank Ghana Limited, which merged several struggling banks, and the acquisition of certain institutions by the state-owned GCB Bank.
The Securities and Exchange Commission (SEC) also played a pivotal role by withdrawing licenses from 53 fund management companies.
The clean-up was aimed at addressing systemic issues such as weak corporate governance and insolvency that had plagued the financial sector.
Initial estimates placed the cost of the government’s intervention at GHS 16.4 billion excluding interest. although Vice President, Dr. Mahamudu Bawumia later indicated that the total expenditure may have reached GHS 25 billion.
