Rapture In The Banking Sector Of Ghana

Introduction

The current events unfolding in the banking sector is very scary and unfortunate, although the ending would be very successful but for the huge numbers of staff that may be retrenched at the end.

I personally commend the Central Bank especially the Governor, Dr Ernest Addison for the strong leadership decision and the timely manner these decisions were made to avert total collapse of these five banks that have being consolidated into one strong entity.

I am very confident and optimistic that the banking system in Ghana will become one of the best resilient and robust financial systems on the continent; it can only get better and great at the end.

It didn’t come to me as a surprise because the financials of these consolidated banks said it all and the serious corporate governance breaches by the board and management of these banks were evident.

I want to retreat the point I made in my previous article that; “It is sad to see the efforts of indigenous individuals of being washed away as a result of the failure of some board of directors and management delivering on their mandate”.

The Board and Management of these five collapsed local banks failed on their fiduciary responsibility entrusted in their hands by the shareholders.

The collapse of indigenous banks has become a set back to the effort of promoting indigenous Ghanaians to take control of our economy by building strong local institutions.

The history of bank failure in Ghana is dominated predominantly with local Banks with some evidence dating as far back as year 2000 when the Bank for Housing and Construction collapsed.

One would have expected that lessons learnt from our history would be a guide to ensure no local bank collapsed again but unfortunately in less than a year after the collapse of two local banks (UT & CAPITAL BANKs), we have witnessed yet another revocation of licenses of five banks (Construction Bank, Beige Bank, Royal Bank, Unibank, Sovereign Bank) and consolidating them into one strong bank; Consolidated Bank Ghana Limited (CBG).what are we not doing right? 

That the foreign banks are getting it right.

Anymore RAPTURE????
Which bank is next????
Do we still have distressed banks????
Who is next to throw in the towel????
How many local banks are remaining?????
Any distressed foreign bank????
What is happening to the distressed foreign banks in Ghana??????

Contributing Events Causing Collapse of Banks
In this article, I will try to provide some events that may have contributed to the reasons why we are where we are now and what we need to do going forward to avert any more of such occurrence in the future.

The breached in CORPORATE GOVERNANCE, CREDIT DELIVERY, POOR RISK MANAGENT and GREED is what has led us to this end. Some have said capital but I say if you prudently manage what you have well and you prioritize, you may not have these issues.

• Severe impairment of capital.
• Severe deterioration in asset quality (high NPLs)
• A comprehensive Asset Quality Review (AQR) showed substantial provisioning shortfalls
• Bad behavioral conduct by Board members and key management personnel (Bank Cartel)
• Weak Banking Supervision by BoG.
• Weak financial stability risk assessments by BoG
• Poor/bad adherence to Credit policy and interference in credit delivery by to management/board and at times government for personal interest gains.
• Breaches in corporate governance guidelines
• Lack of integrity, self-discipline, experience, zero self-dignity on the part of CEOs/MDs/key Management personnel and Board members.(Square pegs in round holes)
• Noncompliance with financial statements law
• Noncompliance by banks with the established Collateral Registry Ghana to register charges and collaterals created by borrowers to secure credit facilities provided by lenders.
• Noncompliance by banks and weak enforcement by BoG on CREDIT REFERENCE BUREAU
• Noncompliance to ICAAP(Internal Capital Adequacy Assessment Process) by banks

Reforms Expected Going Forward
• No Director/Management member of a failed bank/financial institution should be allowed to be a director or hold any position in the country (Private sector/ Public sector).

• No individual should be allowed to serve on more than one board in the financial sector.
• No Minister/MP should be appointed to serve on any board in the financial sector; they are a key threat to the success of the sector (influence used to destroy).
• Government/The President should not appoint or nominate members to any board in the financial sector.
• BoG must profile, conduct proper due diligence and due care on all board members and key management members of all financial institutions before approving them.
• BoG must ensure strict adherence to publication of quarterly (Q1,Q2,Q3 &Q4)Financial Statement by all Banks/Financial institution.
• No Board should be in place for more than four year as it is key to maintaining good corporate governance.
Questions on my Mind
• Can we begin to demand accountability from all those who played key role in the collapse of the 7 banks ie; UT Bank, Capital bank, Construction Bank, Beige Bank, Royal Bank, Unibank, Sovereign Bank?
• Can we initiate the process of mounting PRESURE on the Central Bank/The Governor/Government/The President to investigate and convict the Board of Directors/CEOs/MDs and Managements of these 7 collapsed banks since it is our TAX PAYER Money they are going to use to clean their mess as it’s happened in ICELAND?
• Can we demand that all PROPERTIES/ASSETS of all people who played key role in the collapse of these 7 banks be confiscated?
• Can we initiate the process of investigating the EXTERNAL AUDITORS of these 7 collapsed bank and prosecute individuals found for WINDOW DRESSING OF FINANCIAL STATEMENTS?

• Can we demand prosecutions of the CHIEF INTERNAL AUDITORs of these 7 collapsed banks?
• What were they doing or happened to the THREE LINES OF DEFENSE (the risk department, the internal control & the external auditors) for these 7 collapsed banks?
• Can the shareholders of these 7 collapsed banks demand accountability and prosecution of the Board/MD/CEO/CHIEF INTERNAL AUDITOR/CFO/HEAD OF ENTERPRISE RISK & External Auditors for failing to deliver on their mandate?
• Can the shareholders of these 7 collapsed banks sue the Central bank (BoG) for failing to deliver on its supervision mandate?
Recommendations
• The national independent stakeholder institutions (CIMA/ACCA/GSE/CIB/IIA etc) should push for the reforms in the financial sector to protect and safeguarded the confidentiality/integrity and confidence in the financial system in the county.
• The legal fraternity of the country should be concern, get involved in the collapse of these 7 banks and push to prosecutions where necessary.

Conclusion

Sanity and confidence can only be restored in the Ghanaian financial system when sanctions are implemented to forestall all future occurrences.

The Central Bank must equip its Banking Supervision department with experienced/selfless and high integrity personnel to deliver the best on their mandate.

Ghana can’t develop without critical and analytical thinkers who are discipline. Let us have some prosecutions!!!!!


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