Accra, Ghana, August 29, 2019//-Economic analyst Professor John Gatsi has urged the government as a matter of urgency to work hard to restore the smile of Ghanaians following the completion of the financial sector in the country.
The Bank of Ghana (BoG) has with effect from 16th August 2019, completed the clean-up of the banking, specialized deposit-taking (SDI), and non-bank financial institutions (NBFI) sectors which began in August 2017.
This follows the revocation of the licences of nine (9) universal banks, 347 microfinance companies (of which 155 had already ceased operations), 39 micro credit companies/money lenders (10 of which had already ceased operations), 15 savings and loans companies, eight (8) finance house companies, and two (2) non-bank financial institutions that had already ceased operations.
Prof Gatsi and other economists said the revocation of these licences had created massive unemployment as thousands of jobs had been lost in the West African country.
He added: “It is a fact that the banking sector crisis and the approach to resolving it as well as the effects on indigenous banking space, businesses and individuals will remain topical especially as we await levels of pass through effects”
Banking and financial sector crises have “cause and effect” dimensions. How to resolve such crises rest on the quality of assessment and approach to the resolution, Prof Gatsi who is also the Dean of the University of Cape Coast (UCC) Business School, told African Eye Report.
He continued: “Whatever is convenient for any stakeholder will not take away the fact that, job savings is an infinitesimal portion of joblessness created in the financial sector and real sector of the economy as a result. The effect on entrepreneurial finance and stock market performance is no more difficult to assess”.
The scale of psychological and displacement cannot be underestimated. This crisis has moved more people above the poverty line to below poverty line with high degree of vulnerability within a short period of time for some families”.
Unnecessary political insinuations
Prof Gatsi warned that reading political lenses into the financial sector crises was not the better way to address the problem.
He explained: “Political association of the causes and resolution has never proven to be the best approach. It is fruitless to use the political association approach as problems identified when National Democratic Congress (NDC) was in power are the same when New Patriotic Party (NPP) assumed the governance of the country”.
For instance, if the revocation of licenses were due to inadequate and inappropriate capital, then this affected the two parties as the banks final licenses were granted to Construction and Beige Capital in 2017 with ceremonies graced by top government officials including the current governor, Prof Gatsi noted.
“Let us be guided that the opening sentences of Sections 9 and 16 of Act 930 is that a final license to operate a bank is given when the bank of Ghana is SATISFIED. In section 16 , notwithstanding the said satisfaction by BoG, if it is discovered later that the applicant for licenses provided false information on a material requirement such as capital requirements, the BoG is empowered to trigger its regulatory provisions to punish and the punishment may include revocation of license”.
The implication is that even in the presence of first class due diligence and professionalism the regulator or officer in charge may be misled or provided with false information, the economist added.
In the face of the above why treat the banking sector issues with an approach tainted with political pronouncements. Again from the above except in very clear circumstances where an officer of BoG personally acted incompetently, recklessly, unprofessionally, all those expecting prosecution of BoG officials should note that that will not happen merely because a bank collapsed.
“Even when they are charged with any offense, the state must prove lack of professional judgment, knowingly engaging in reckless professional duty and fraud. Unless we want to say that because a governor or deputy governor signed final licenses they are guilty of causing collapse of banks”.
That understand will mean that the current governor and previous governors should be before court now but it doesn’t work “like that”. If this understanding is the case why would one major on political association?
Solving the financial sector problems
To solve financial sector problems of the scale currently going on, comprehensive identification of documented causes, scenarios or portfolio of documented solutions with right orientation, objective and comprehensive estimates to resolve the problem using any of the scenarios must be conducted, Prof Gatsi suggested.
He said that the comprehensive identification of causes was done between 2014/2015 and was also captured in various IMF reports. The causes identified led to many legal reforms in late 2015 and 2016.
Most of the non performing loans were linked to energy sector indebtedness to banks which negatively affected their liquidity. Also general fiscal management challenges and regulatory management across the banking and non banking financial sectors were clearly identified.
To address these issues the following Acts were put in place in preparation to activate the process for the final steps to deal with the problems.
The Acts he mentioned are Energy sector levies Act, Public Financial Management Act, Banks and Specialized Deposit-Taking Institutions Act, Depositors Protection Act, and Securities Industry Act.
What was left to be done?
“What was left to be done is implementation of the laws by doing comprehensive budget for the process from principle based perspective for the implementation across the industry. This is where we failed in the structured process being followed until 2017”, Prof Gatsi further explained.
An indication is that by the time the BoG started the collapse now termed cleanup, there was no comprehensive financial estimates for the process approved by Parliament.
He recalled that Parliament conducted some bipartisan investigation into the exercise because not even Parliament was well informed about the exercise.
In the process, the approach adopted led to violation of Ghana’s Securities and Exchanges Commission (SEC) laws in some cases. Also violation of the very corporate governance rules, public financial management laws, the rights of people and by so doing we began a cycle of panic which triggered acute liquidity problem, Prof Gatsi noted.
“The reality therefore, is that very clear steps were taken from 2014 till 2016 and continued from 2017 by the new administration. As to whether the approach from 2017 is the best will continue to occupy the discussion space either professionally or politically.
It is clear that the effects of the cleanup are assuming legal issue, political, health and psycho traumatic experience for some. The narrative is changing over the past few weeks where politicians and known supporters of both NPP and NDC are complaining about the negative effects. Even people who were supporting the cleanup approach from 2017 have started complaining about it”.
Opposition parties’ experiences are needed
Prof Gatsi therefore called on the government to bring the best brains of the opposition parties and theirs together to help solve the crises thereby restoring the lost smile of the Ghanaian people.
African Eye Report
