The Ghana Association of Bankers has blamed governments over the years for the challenges facing some commercial banks in the country.
According to the association, the inability of successive governments to pay contractors on time for work done has crippled the banks that finance the projects.
Speaking at a stakeholders’ engagement organised by the Bank of Ghana, the president of the association, Mr Alhassan Andani, noted that if the government failed to reimburse contractors and service providers of government projects, they became unable to pay back loans taken from banks and that created liquidity challenges.
He added that the government was complicit in promoting the country’s bad credit culture, hence the poor performance of the commercial banks.
“The Ghana government still plays more than 50% in terms of its participation in the Gross Domestic Product of the country,” he said.
“There are very large exposures that the financial sector makes available to the government and government-related parties in the spirit of critical industry support that turns to not get paid on time; and not just on time but [also] severely delayed,” he stressed.
Mr Andani pointed to the severe delays in the repayment of loans that the government and government-related parties owed the banks as against the stringent measures that the Banking Supervision Division of the Bank of Ghana takes to determine loan classification dates and the general health of banks, which it labels as “current”, “impaired” or “write downs”.
Some banking industry watchers have observed that when the government and/or government-related parties fail to repay their loans, the banks are forced to borrow from the Central Bank or other sources at very high interest rates to run their businesses, which tends to increase their cost of operation.
However, as soon as the banks begin to face liquidity challenges, the same Bank of Ghana moves in to shut down the banks or takes measures that create the impression that the leadership of the banks was constituted of bad managers.
In August 2017, the Bank of Ghana revoked the licences 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 Bank of Ghana with no other option than to undertake a Purchase and Assumption transaction as the least costly method of dealing with a collapse.
According to Bank of Ghana, the banks were “unable to develop an acceptable plan”, although they 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.”
It added that however, the owners and managers of UT Bank and Capital Bank were unable to increase their capital to address the insolvency.
The Minister for Finance and Economic Planning, Mr Ken Ofori-Atta, said the Bank of Ghana had to step in and address the challenge that both banks posed to the entire financial system by facilitating the takeover 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,” he said.
Contractors and govt clash over payment
The Concerned Cocoa Roads Contractors (CCRC) Association had earlier appealed to the government to intervene for COCOBOD to pay contractors which worked on the Cocoa Roads Rehabilitation Project.
According to the CCRC, the failure of COCOBOD to pay them about GH¢3 billion for roads constructed four years ago, under the Cocoa Roads Rehabilitation and Improvement Project, is crippling the businesses of about 120 members of CCRC.
The previous government initiated the Cocoa Roads Rehabilitation Project to construct new roads and rehabilitate dilapidated roads in the cocoa-growing areas of the country, to facilitate transportation and carting of cocoa to the harbour.
Source: Daily Heritage
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