Fear continues to emerge as experts analyze the infrastructure of Ghana’s weak banking sector. Speaking on Joy FM’S Super Morning Show Monday, financial analyst Dr. Daniel Seddoh said he is adamant that the fallout of Ghana’s banks “is not over.”
But the solution is simple, he says. He explained that a large part of the problem is Ghana’s superfluous number of banks. Thirty-four of them to be exact. “Ten would be ideal,” Seddoh says. “In Canada, their financial sector is working,” because they only have five banks that dominate the country.
He further explained that part of Bank of Ghana’s failure to quickly spot and rectify errors boils down to the massive number of banks and their numerous branches throughout the nation. “It’s about efficiency. Bank of Ghana can only do so much. The activities are blurred,” adding that “if we are going to solve the problem realistically we need to look at regulation.”
Seddoh suggests that Bank of Ghana (BoG) implement a new regulatory strategy that would oversee all the microfinance and banking institutions in the country. “BoG does not have the capacity to change these things. We need better regulations.”
On August 2, five financial institutions (The Construction Bank, The Royal Bank, uniBank, BEIGE Bank and Sovereign Bank) merged to form The Consolidated Bank of Ghana Limited. The Bank of Ghana’s decision to combine the banks was based on investigations finding several malpractices including misapplication of funds.
Second Deputy Governor at Bank of Ghana (BoG), Elsie Addo Awadzi, told Joy FM at the time that banks who do not abide by the rules of the central bank would be penalized to the fullest extent of law. “What happened bears testimony to the fact that this is a new day and we are building a new culture of integrity and trust within the banking sector,” Awadzi avowed.
She explained that in March 2018, an administrator was sent to investigate wrongdoings at one of the collapsed banks, uniBank. “We had suspicions that the returns from uniBank were not correct,” adding that the bank failed to report returns it was required to complete monthly.
Upon investigation, the central bank found that the bank was flubbing bank sheet numbers. Scores of financial transactions were improperly recorded. A paper trail led BoG to find transactions were not in the benefit of depositors. “As a result, to protect the profits of the banks, we took a big decision to revoke their licenses.”
Following the banks’ collapse, the government of Ghana has issued a ¢5.7 billion bond to support the new Consolidated Bank. In a statement, the central bank detailed that all funds at the banks have been transferred to The Consolidated Bank. Customers must now conduct all businesses through their respective banks that have now become branches of The Consolidated Bank. All Board of Directors and shareholders of the former banks have been terminated.
“Ghana needs a strong and stable banking sector to drive the process of economic transformation,” the statement read. “A weak banking sector means that access to credit will be limited while lending rates will continue to be high.”
BoG further maintained that customers’ funds are safe. The regulator stated that it expects “the new bank will be better governed and managed to become a strong indigenous bank to support Ghana’s economic transformation.”
Awadzi said that in the interest of the depositors, the decision to merge the banks will be beneficial to the future of Ghana’s financial sector. “We take supervision seriously and the BoG is taking great effort to ensure that supervision is enforced,” she elaborated. “Not complying with the law will not be tolerated.”