Tuesday, 9 October 2018

Bankers fume at BoG over panic withdrawals

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Adnan Adams Mohammed

Players in the Banking and financial institutions have registered their dismay at the way the Bank of Ghana is managing the nerve-wracking financial sector crisis.

According to them, the mismanagement of the situation has resulted in panic withdrawals which are affecting the operations of almost all banks and financial institutions in the country.

However, Samuel Ampah, Head of Research at Group Nduom, has suggested that, a structured and reassuring communication by the industry regulator would have quelled the fear that gripped depositors in the wake of the recent collapse of some five indigenous banks.

“It behooves on them [Bank of Ghana], in the midst of all these panic withdrawals, to come in. It wouldn’t hurt so much for the central bank to come and say ‘the people of Ghana, we are going through a reform, review; we are doing a whole lot of clean up in the banking sector but this is the stage we have gotten to and, therefore, we think that everything is ok now. Everybody put your money in the banks.

“For every economy to thrive, we need a very vibrant banking sector. That is non-negotiable,” Mr Ampah said.

His comments come on the back of a national campaign by the Founder of Group Nduom, Papa Kwesi Nduom, against the panic withdrawal of deposits.

The withdrawals hit banks and savings and loans companies following the collapse of seven indigenous banks within a space of 12 months.

The banks ran into liquidity challenges, while some, according to the central bank, obtained operational licences under dubious means – in breach of the banking regulations.

This has caused public mistrust in the local banks while the BoG insists that it is working to clean up the sector. It has created The Consolidated Bank Ghana to take over the five banks while the assets and liabilities of Capital Bank and UT Bank which collapsed in 2017 are now owned by state-owned GCB bank.

Mr Ampah believes that, an intervention by the Bank of Ghana will calm the nerves of the people of Ghana. “They are the regulators. We have several regulators like the Security and Exchanges Commission, the pensions regulators are there, the insurance regulators are there. But in the case of banks, it is the Bank of Ghana.

"So some believe that if the central bank had come at the time to say that ‘look there are some banks that are not doing what they are supposed to do, therefore, we are going to revoke their licence and then there are some banks that we need to merge their operations.”

He suggested that the Finance Minister could have also calmed the nerves of depositors when the crisis struck.

“A similar situation happened [in an African country], it took the Finance Minister to tell the people of that country that ‘nothing is happening. Everybody calm down. The economy is doing well, there were some reforms in the banking sector, it has stopped; we are doing well,’” said Mr Ampah.

The Ghana Association of Savings and Loans Companies and individual commercial banks have therefore appealed to customers to have confidence in the financial sector despite the challenges confronting it, while calling on the regulator to intervene and save the situation.

The panic withdrawals, the association decried are unnecessary and a potential threat to their existence.

Executive Secretary of the association, Mr K. Koduah, disputed claims that savings and loans companies were collapsing.

He stressed that, they are in constant consultation with the sector regulator, the Bank of Ghana to ensure that the right things are done at all times in the best interest of their clients.

In an interview with Accra base Radio, he appealed to Ghanaians to stop spreading the rumours since it has the potency of collapsing their companies. He was responding to a statement issued by the association assuring customers that their deposits are safe.

The statement read: "Customers may be going through a period of uncertainty and experiencing some difficulties in dealing with some of our members. We are however by this press statement assuring all customers that the sector is vibrant and evolving and in readiness to serve our customers better'. The greater majority of members are stable and customers should maintain their confidence in these institutions they have worked with over the years. Customers should, therefore, disregard publications and rumours that suggest that the Savings & Loans sector is collapsing.’’

Meanwhile, the Bank of Ghana (BoG) has hinted of closing down insolvent companies. Governor of the Central bank, Dr. Ernest Addison last week told journalists that Savings and Loans Companies in bad standing will be shut down.

He added that, actions taken so far to stabilise the banking sector would not be different from the Savings and Loan Companies.

“The engagement would ensure that the necessary funds can be raised on the part of the government to cushion depositors of these institutions. It is believed that this could be one of the tough measures that that regulator is planning to take to sanitize the entire industry,” the Governor said.

In recent development, the Bank of Ghana has shut down Dancom Microfinance Limited for operating illegally.

The Directors of the company have also been arrested and are being prosecuted for operating without a license.

“…Dancom Microfinance was engaged in deposit-taking activities without licence contrary to section 6(1) of the Banks and Specialized Deposit-Taking Institutions Act, 2016(Act 930).”

“The general public is hereby informed that Dancom Microfinance Ltd. was NOT LICENSED to engage in microfinance business,” the BoG’s statement said.

The statement from the central bank on its decision also cautioned the public against doing business with the company.

According to the Bank of Ghana, it will not be liable to clients who continue to transact business with the company.

“The general public is cautioned that anyone who transacts business with Dancom Microfinance Limited does so at his or her own risk, and Bank of Ghana WILL NOT be liable to such clients or depositors in the event of loss.”

Until its closure, Dancom Microfinance operated from offices at Old Ningo, Ada and Afienya.

The closure of the company comes on the back of the central bank’s tightened stance on sanitizing the financial sector by clamping down on recalcitrant operators.

Meanwhile, the Founder of Groupe Nduom has appealed to customers of his bank, GN Bank to cease panic withdrawals that have hit the bank in recent times.

Dr. Papa Kwesi Nduom noted that his bank is financially sound and the panic withdrawals would rather affect the bank.

He told traders at the car parts retail market at Abosey Okai in Accra,last week, that the panic withdrawals have kept him awake at night.

“I’ve had sleepless nights for the past few weeks because of the panic withdrawals,” he lamented.

Dr Nduom explained that when depositors bring their monies to banks, what the banks do is to invest the money and also loan those monies out to contractors and business folk.

“So when 20% or even 15% of the depositors decide one day that they’re going to withdraw all their money, then we are going to have a problem,” he said.

He added that the banks keep some of the money to transact day to day business while some are kept with the central bank “so when there are panic withdrawals, it affects you negatively and the most immediate problem is you run into liquidity challenges”.

“…this happens because the money you are supposed to use for regular withdrawals, you give it to someone or two people,” he explained.

He told the traders that investing in local banks is the only and surest way for sustainable development in the country.

“If you go to the small towns, it is us who are there and not the foreign banks,” he said.

Dr Nduom also revealed that by the end of 2018, GN Bank would have provided the Bank of Ghana with its minimum capital of GHC400 million.

He has also appealed to Ghanaians interested in owning shares of GN Bank to approach the institution and purchase the shares.

But, speaking on merging with other banks, Dr. Nduom didn’t dismiss the possibility but stated that that is not for the purpose of achieving the BoG’s requirement of GHS400 Million.

He explained that creating mergers is just to form a stronger local bank and not to reach the minimum capital requirement.


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