Bawumia justifies approach adopted for banking sector cleanup

Finance Minister Ken Ofori-Atta (Left) and Vice President Bawumia is the head of the economic management team

The Vice President, Dr Mahamudu Bawumia, has justified the decision to clean up the financial sector and also the approach adopted.

He equated the problems that existed in the sector to a cancer that was fast spreading which needed to be truncated.

Speaking at a conference held by the Industrial and Commercial Workers Union (ICU) in Accra on Thursday August 26, Dr Bawumia said there was the need to act swiftly to save depositors’ moneys.

He was responding to a claim by Secretary General of the ICU Mr Solomon Kotei to the effect that the exercise was harsh because over three hundred of their members lost their jobs.

Mr Kotei had said “Mr Vice President, it is a biggest problem for the ICU when most of our members lost their jobs and as of now no restoration, even if compensation were paid, compensation didn’t write off debt they owed.

“What they took home was nothing to write home about and we are expecting something to be done about that.”

In response, Dr Bawumia said “We had to pay 21billion Ghana cedis to save deposit at the banks the question of course this too bitter a pill , did the Bank of Ghana go overboard? You had a situation where you had a cancer and is on your toe and if you don’t cut it off it is going to spread and we had to cut it off and make sure we took the decisions.”

It is recalled that last year ahead f the general elections, the Finance Minister Ken Ofori-Atta has gave the approach that was adopted by the Bank of Ghana a clean bill of health.

READ ALSO:  COVID-19: Central Banks around the world responded with bold measures - BoG Boss

He said the approach was apt because there was a huge problem in the financial sector that needed to be solved.

The BoG between 2017 and 2019 swept through the financial sector of the economy.

The central bank revised the minimum paid-up capital for existing banks and new entrants from GHS120 million to GHS400 million.

According to the regulator, this was to test the viability of the banks.

The banks that were unable to meet this new requirement were either merged or collapsed.

Some nine local banks, 23 savings & loans companies, 347 microfinance institutions, 39 finance houses and 53 fund management companies closed down during the exercise. UniBank, The Sovereign Bank, The Beige Bank, Premium Bank, The Royal Bank, Heritage Bank, Construction Bank, UT Bank, Capital Bank all collapsed. Some analysts and observers criticized the BoG and the Finance Ministry over the collapse of the banks because in their views, these banks could have been saved to continue employing Ghanaians.

For instance, former President John Mahama criticized the way and manner the government handled the banking crisis.

Speaking to a group of Ghanaians as part of his campaign activities ahead of last year’s elections, Mr Mahama said: “Financial institutions have been collapsed, Ghanaians money have been locked up… You needed GH¢9 billion to save those banks and financial institutions that collapsed but because of politics somebody decided to closed them down. “Now Ghana is spending GH¢22 billion to pay the deposits of peoples whose moneys were lock up.

“What kind of sense is this? You won’t spend GH¢9 billion to save the banks but you pay GH¢22 billion to pay back peoples deposits and you can’t even pay. I heard the president say he has paid 98 per cent of the depositors. We should ask the depositors how have they received their money?” Mr Mahama claimed.

READ ALSO:  Zimbabwe's Mugabe faces looming resignation deadline

He said the government could have spent GH¢9 billion to save the banks rather than allowing them to collapse and to pay deposits of customers to the tune of GH¢22 billion.

But speaking in an interview with TV3’s Etornam Sey on Monday October 26, 2020, Mr Ken Ofori-Atta said the approach adopted by the BoG was perfect.

He said “There was a problem and we had to solve that problem. Fundamentally, was the approach necessary? No question about that, the approach was okay.”

By Laud Nartey||Ghana