The Finance Minister, Ken Ofori Atta has stated that confidence in the banking sector has not waned despite the recent take over of the UT and Capital banks by the Ghana Commercial Bank (GCB).
In August, the Bank of Ghana (BoG) revoked the licenses of the UT and Capital banks, describing them as “deeply insolvent.”
Liabilities of the two banks, according to the central bank overwhelmed their assets, leaving the BoG with no option than to undertake a Purchase and Assumption transaction as the least costly method of dealing with a collapse.
The banks were “unable to develop an acceptable plan”, according to the BoG although it made efforts to help both banks recover through private alternatives.
The Central Bank said there were “repeated agreements between the Bank of Ghana and UT Bank and Capital Bank to implement an action plan to address these significant shortfalls.”
However, the owners and managers of UT Bank and Capital Bank were unable to increase their capital to address the insolvency.
Finance MInister, Ken Ofori Atta delivering the 2018 budget statement in Parliament
Mr Ofori Atta said the BoG had to step in and address the challenge that both banks posed to the entire financial system by facilitating the take over by the GCB Bank.
“This intervention was made with the clear policy intent to protect deposits of the public and prevent any contagion effect on the entire industry.
“The government is proud to announce that despite the failure of these two banks in 2017, the confidence and trust in the financial sector remain strong,” he added.
He said all banks are expected to meet the new minimum capital requirement as stipulated by the BoG for universal banks – from GHS120 million to GHS400 million – by December 2018.
The increase in the capital requirement, he stated, was to ensure that banks have more capacity to lend to businesses, especially within the purview of their single obligor limits.
“Government streamlined ESLA flows to accommodate all the existing legacy debts – about GHS10 billion – owed by the energy sector firms to banks and suppliers, and took steps to issue an ESLA-backed bond to pay off these debts.
“This initiative is very important in resolving the liquidity challenges faced by the banks and will enable stronger credit to the private sector especially as banks’ non-performing loans improve.
Mr Ofori Atta said the government has also prepared the payment systems and electronic transfer bill to support the transition from cash dominant to cash light economy.
“In 2018, this Bill will be laid before Parliament,” he added.