Are we surprised that Ghanaian banks are collapsing? It may just be the beginning. One does not need to be one of these ‘celebrity death’ prophets or indeed a ‘rocket science’ banker to know this. Since Dr. Kwame Nkrumah declared 61 years ago ‘that the Blackman is capable of managing his own affairs’, where in Ghana has this happened? Dr. Nkrumah’s statement has only ended up being an abstract philosophy as far as Ghana and most of Africa are concerned. All hope is not lost though, let’s give ourselves 200 more years.
Unibank has been the 3rd bank to be declared insolvent in 7 months. Sadly it is the 3rd Ghanaian bank. Additionally the Bank of Ghana’s (BOG) recent report on the financial sector reveals 38.5% distressed membership of the microfinance and lower tiered banking subsector. It is a bit refreshing though that the BOG seem to know about the trends and have assured us to deal with it. However a politician, who is a former Deputy Minister of Finance sees this as the government collapsing Ghanaian banks. The utter shock in his statement is that the former Honourable Minister from his earlier position should have known the state of these banks and the possibility of what could befall them. Why does politics take the place of sound reasoning and analysis? That is one of the problems why Ghanaian banks are collapsing and that is why they would continue to collapse if change does not happen.
The number one root cause is GOVERNANCE. What we are witnessing is only a microcosm of how Ghanaians govern our entities. What one institution in Ghana works? Are Ghanaians satisfied with even how the seat of government works? It was interesting to look at the qualifications and experience of the Unibank management, as well as that of erstwhile UT and Capital banks. These teams are ‘big enough’ to manage any bank under the sun and yet their banks collapse like pack of cards. With the relevant frameworks, discipline and resolve to succeed, a bank should be one of the easiest organisations to run profitably. The risk of contagion and counterparty can materialize, but the bank that takes risk management and governance seriously should stand in the midst of rancorous systemic shake ups. The likes of Goldman Sachs, Standard Chartered Bank and Rabobank all stood when the world financial crises rocked. Their risk management attitudes are proven.
The Central bank has put out the Governance guidelines seeking to ‘remind’ financial institutions what should be done right. These guidelines and conventions have always been there, embedded in the Banking Acts, just like all other laws of the land. Additionally there the international conventions like the Cadbury Report, Sarbenes-Oxley Act, BASEL II and BASEL III which all emerged as responses to such tragic governance and industry events.
It is great that the Central bank emphasizes the separation of powers for functions and relatives, however it may not be the solution. There could be many such breaches committed by separated functionaries who are very unrelated. The solution in this sense will lie with unfettered and ‘unpoliticised’ enforcement by the regulators and other institutions. All the other situations noted in the cases of the collapsed banks namely, heavily impaired assets, mismanagement of Third Party Funds (TPFs), provision of inaccurate financials, illiquidity and insolvency are symptoms of a more deeply rooted and beleaguered governance this country is used to in all spheres of our lives. The foreign banks that are deemed strong emanates from adherence to their own internal risk management and governance and not necessarily what the Bank of Ghana expects from them.
It is also worth asking where this unbridled quest to build a group of companies come from? It seems the current trend and ploy is to set up a financial institution to mobilise deposits and just use depositors’ funds to diversify into other unrelated businesses in which the entrepreneurs are clueless how they run and more so do not have the time to build. Depositors’ money are thus exposed to all the harsh risks of a startup which strangely banks do not finance. What happened to our MBAs? What happened to all the business thought leadership events where these same governance wreakers are made to speak? It is high time the regulators become highly interested in other businesses that banks and other financial institutions set up. After all international investors do this too.
It is heartbreaking that the 61-year old declaration by Dr. Kwame Nkrumah would forever look like a mirage for Ghana. It is more heartbreaking to think that upon all the qualifications of the average Ghanaian professional, Ghanaians cannot set up and own big global banks and businesses.
Much as Ghanaians would have loved to see our own run successful and sizeable banks, it is becoming increasingly convincing that, what would work for our country is a ‘colonised’ banking system for Ghana owned by foreigners. Patrons of banking service would prefer to know that their deposits are safe and they can access them anytime, than a botched patriotism of saving with a Ghanaian-owned bank where their treasured deposits can vapourise anytime. Come on foreign banks, our salvation lies in you. Never mind the politicians who talk where their stomachs lead them. However, lying inside the Ghanaian is the hope that one day we can get a privately Ghanaian-owned bank that meets global standards, but for now it is not surprise all that Ghanaian banks are going down. It could also be a phase which, like a bad dream, we would wake up one day to see its all gone. It would however depend on what we do today.