When Ghana’s central bank cracked the whip amid a volatile overbanked sector
The Central Bank of Ghana continues its efforts to rehabilitate the banking sector. Notably, among some obvious sanctions it has carried out is the compulsory takeover of two private banks: Capital bank and UT bank back from the state-owned Ghana Commercial Bank under the authorization of the Bank of Ghana in 2017. Other activities have been carried out by the central bank of Ghana still, the sector still needs some stability. Ghana’s banking sector is currently unstable, although its prospects look good in the not-too-distant future if the central bank undertakes basic regulations and activities.
The sector is still healing its wounds from last year’s sanctions on the 2 banks, one more bank has experienced the central bank’s direct sanctions thus Unibank (Was named the 6th best performing company in Ghana at the Ghana Club 100 awards in 2017). Currently, the Central Bank of the country announced that on March 20, 2017, it authorized and authorized the management of Unibank (a private bank) to be dissolved and taken over by KPMG. Interesting!
Now the Bank of Ghana itself needs some cleaning. It is highly unacceptable to control a sector from which a player is rated as 6th best, only to claim that he has been withholding some important data. However, the central bank has its defense to the claim against Unibank that the bank persistently maintains a capital adequacy ratio close to zero, which could effectively mean that Unibank is insolvent. The Central Bank’s reports indicated that it ordered Unibank to refrain from making additional new loans to customers, but the bank did not comply with the directive and continued to make new loans. Unibank was further ordered to refrain from making further capital expenditure which they (Unibank) did not comply with, thereby violating Section 105 of Act 930.
It must be acknowledged that Unibank is a creative bank if their banking activities over the years are to be observed from a distance, as such the leadership of the Central Bank and KPMG for the bank must be one that will not destroy their positive employee-customer culture, which is easily seen to “vibrate” among its customers and bank. Unibank has some very loyal customers, many of whom are traders. Bank of Ghana should therefore lead Unibank by taking into account the existing brand and find the obvious ways to revive the bank.
Having said that, the number of universal banks is too much for Ghana. The number should be limited, as having nearly 40 banks for a population of 26 million is obviously a lot. What needs to be done is to build the capacity of existing banks to “branch out” to customers. This can be done in two ways: expanding physical infrastructure to reach closer to customers and expanding digital (online/mobile banking) infrastructure. Existing banks should strive to improve their service, reach out to the people, expand digital banking and improve bank security.
To be clear, however, I am in no way against the registration of banks. In fact, my position is exactly the opposite, as I do not forget the importance of financial services to people and the economy as a whole. My position will pass for the opposite. My view is clear that instead of registering new banks, some of them operating with multiple branches without better services or infrastructure, it would be better to provide resources to the existing banks to improve their capabilities.
Finally, some of these financial institutions will need to consider merging if there is any possibility of remaining in business profitably and serving customers to standards as the sector begins to become more competitive in the coming years and especially now that the minimum requirement capital has been increased by the Central Bank to 400 million Ghana cedis for banks, which will take effect from December 2018.
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