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The cost of ongoing cleaning of the financial sector is expected to reach GH ¢21 billion by the end of the year, according to new figures from Finance Minister Ken Ofori-Atta.
The finance minister projected Monday during the presentation of the mid-year budget review that it was likely that the cleanup would reach $ 3 to $ 4 billion by the end of the year. .
This is equivalent to GH ¢$ 21 billion using the Bank of Ghana's dollar transaction rate for commercial banks.
This new figure concerns GH ¢$ 3 billion more than Joy Business predicted last month.
However, the projected figure could even be reached before the end of this year, after the Minister of Finance told Joy Business that the last batch of reforms – which will target the credit sectors – would occur before the end of September 2019 .
Joy Business also learns that this can exclude the estimated cost of any clean-up of capital and investments.
The enormous cost of cleaning up the financial sector raises concerns about the appropriateness of the overall approach to cleaning up the financial sector.
It is also uncertain that the designated receivers will be able to recover the costs from the owners and administrators of the liquidated financial institutions.
For example, one of the recipients suggested to Joy Business that it was difficult to identify the badets owned by the owners or administrators of these former institutions.
Meanwhile, the project GH ¢21 billion are expected to increase further by the end of this year.
Here is what the Minister of Finance told Parliament about the financial sector when he presented the mid-year 2019 budget review:
FINANCIAL SECTOR
Mr. Speaker, the strength of our financial system is essential to macroeconomic stability and growth. In addition to providing substantial employment, banks, specialized deposit-taking institutions (SDIs) and fund management companies, as providers of credit, liquidity and investment, play a vital role in the functioning effective our economy.
Mr. President, over the past two years, the Bank of Ghana's bold moves to clean up the banking and SDI sectors have involved the revocation of the licenses of nine universal banks, 347 microfinance companies (155 of which had already ceased). their activities) and 39 microcredit companies. / money lenders (10 of which 29 had already ceased operations). Several years of an unsustainable licensing regime that has lowered entry standards in the banking and SDI sectors, as well as poor supervision and enforcement by the Central Bank, are at risk. origin of these mbadive failures. In addition, there are poor corporate governance and risk management practices, family and friends who manage and influence banks, the abuse of related party relationships, and unsustainable business models.
Many of these institutions had denied depositors access to their deposits for a long time, creating liquidity problems in the financial system, resulting in a high number of credit defaults in the system. The threats to the stability of the financial system and the economy in general were enormous, which justified the bold measures taken by the Bank of Ghana.
The government has demonstrated its commitment to provide timely badistance to depositors whose funds are at risk due to bankruptcies and bankrupt SDIs. The government, through a buy-and-take program, facilitated the consolidation by GCB of two banks. The government then set up Consolidated Bank Ghana Limited and provided it with a capital of 450 million GHAC to ensure that no depositor loses its deposits. The government of Ghana has had to issue bonds worth 11.2 billion GH ¢ to cover the cost of resolving the financial sector and protecting depositors. In addition, the Government of Georgia has provided 925 million GHAR in cash to cover small depositors of 386 microfinance institutions, bringing the total cost to 12.125 billion GH.
Mr. Speaker, the actions of the government have restored confidence in the banking system. Thanks to Government interventions, large deposits held by some 2,655,100 (1,525, 550 bank depositors and 1,129,820 MFI depositors) were safeguarded. More than 3,000 jobs were also recorded.
130. The Bank of Ghana's directive on banks to increase their minimum paid up capital
capital of $ 400 million as at December 31, 2018 was a success. This
4.2 billion GH ¢ new capital injected into the banks. The intervention of the Ghana Amalgamated Trust is expected to result in a strong Ghanaian indigenous presence in the banking sector.
Mr. Chairman, it is encouraging to note that regulatory and policy measures to clean up the financial sector have already begun to bear fruit.
132. Some have suggested that instead of revoking the licenses of the now disappeared institutions, the Bank of Ghana should have maintained them in one way or another. Some even said that the old regime was the "good doctor" that allowed these zombie institutions to continue despite their comatose state and not to practice intensive and intrusive surgery, while the current administration is the "bad doctor" who has entered the country. kill or collapse them.
First, however, when the current administration uncovered the banking and SDI sectors, it was too late to save the already rotting financial institutions, and intensive and intrusive surgery was needed for the many dead -living.
Second, the bankruptcy of these institutions was mainly due to poor governance and weak control of boards of directors, as well as to the unlawful behavior of shareholders and related and related parties who had looted funds and badets from these banks.
Third, continuing to support these failing institutions would have created moral hazard for shareholders, directors and bank managers whose actions or inactions would have been rewarded by the taxpayer.
By revoking the licenses of these insolvent institutions, the Bank of Ghana acted in accordance with its legal imperative, so as to preserve depositors' funds and preserve a significant number of jobs.
And, let me be very clear here, we were on the brink of a huge budget and we do not allow anyone to indulge in a selfish oratory. The final cost,
Mr. Speaker, the amount of the poison pill from the previous government can range from $ 3 billion to $ 4 billion.
Mr President, the liquidation of the old institutions has made good progress, even though impediments have been committed by persons whose unlawful acts were badociated with the failure of those institutions which had no audacity to seek legal cover. Government financial interventions as part of the clean-up operation were only a transitional measure necessary to help mitigate the socio-economic impacts of the failure of the financial institutions concerned. It is imperative that we all support the recovery of the badets of those who embezzled or borrowed money from these institutions and who have failed or refused to repay so that the debts left can be settled. To the extent of the recoveries made by the receivers / liquidators of these institutions, the government hopes to recover the sums it has spent so far to badist the depositors.
This will go a long way in enabling the government to fund other priorities for our socio-economic growth.
Mr. Speaker, the government continues to support effective regulation of the financial sector. We are confident that the Financial Stability Board recently created and inaugurated by His Excellency the President will work diligently to promote a resilient financial system that supports our economic growth agenda. We are also fully committed to supporting the implementation of Ghana's deposit protection system in September 2019 to further protect the interests of depositors.
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