Capping Interest Rates Unwise - Bankers

Bankers have hit back at proponents of an interest rate cap regime, describing it as an unwise move that virtually no policymaker will ever consider.

After emerging from a regulated pricing regime in the 1980s, the banks said the country had come to the realisation that regulating the amount at which banks lend to their customers was disastrous hence the need to allow market conditions to continue to determine the cost of credit.
 
The President of the Ghana Association of Bankers (GAB), Mr Alhassan Andani, said at a media briefing Friday that attempts to cap rates will also be disingenuous to the banking sector.

"Ghana, since 1983 has been moving away from a controlled pricing regime and I am not sure we want to get there again," he said, citing the Wold Bank funded programme in the 1980s, FINSAP that was meant to introduce competition into the financial sector.

GAB's position on the capping of interest rates is at variance with the likes of the Association of Ghana Industries (AGI) which have long argued that banks needed extra pressure beyond market conditions to lower the cost of lending.

Its President, Mr James Asare-Adjei, had earlier explained that industry would be better off if the Bank of Ghana placed a cap beyond which banks should not lend.

In response, GAB's president said bringing back what had been cancelled would be a disaster.

"We have come this full cycle before; before 1984, we were capping interest rates and it was a disaster."

"We mentioned it with the last government and they said they are not coming close to it."

"We do not expect any interest rate caps because it is not a wise thing to do," Mr Andani said at the press briefing.

As a free market, the STANBIC Bank MD said banks should be allowed the free will to determine their respective interest rates based in their cost of funds, among other market conditions.

He was, however, optimistic that lending rates will begin to ease as stability returns to the economy.

Declining interest rates should help inspire the private sector to borrow more for expansion and retooling, which will lead to increased total economic output, measured by gross domestic product (GDP).

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