SoNA: Many finance houses were running as glorified Ponzi schemes – Akufo-Addo

President Nana Addo Dankwa Akufo-Addo has revealed that biggest economic challenge he inherited was the banking sector crisis. He told Parliament while presenting his last State of the Nation Address (SoNA) in his first term on Tuesday January 5 that many of the banks he came to meet were in distress, a situation he said threatened the economy. Perhaps the biggest challenge “My government inherited was the state of the banking sector. Many of our banks were in distress,” he said. He indicated that this was due to the failure of the regulatory institutions to perform their duties well. “The supervisory agencies were unfortunately not performing their duties. Many of our finance houses were running what can be called glorified Ponzi scheme.” Therefore, he said, a radical measure must be undertaken to deal with it, hence the clean up exercise. The approach towards the clean up exercise was criticized by a section on the Ghanaian public with others saying the government could have rescued the failing banks rather than collapsing them. But last Finance Minister Ken Ofori-Atta defended the approach that was adopted towards the clean-up exercise. Mr. Ofori-Atta told TV3’s Etornam Sey in an exclusive interview on Monday, October 26, 2020, that the financial sector is the heartbeat of every economy globally. A weak financial sector, he said, will have dire consequences for the economy and its people, a situation that demands that central authorities step in swiftly to address. Therefore, he said, the Government of Ghana will act quickly to address any challenges that may emerge in the sector again after the recent cleanup exercise. The Bank Ghana with support from the Finance Ministry swept through the financial sector of the economy between the period 2017 and 2019. The central bank first started by revising the minimum paid-up capital for existing banks and new entrants from ¢120 million to ¢400 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. Following this action, some nine local banks, 23 savings & loans companies, 347 microfinance institutions, 39 finance houses and 53 fund management companies closed down during the exercise. In total, the government spent GHSS23billion to undertake this exercise UniBank, The Sovereign Bank, The Beige Bank, Premium Bank, The Royal Bank, Heritage Bank, Construction Bank, UT Bank, Capital Bank all collapsed. Mr. Ofori-Atta said “Once you have the problem, you have to solve it because the financial architecture is the (basis) for any development. “So whether we like or not we had to do that. Now that we have done that we move ahead.”

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By Laud Nartey||Ghana]]>