Professor Isaac Boadi, the Dean of Accounting and Finance at UPSA, has stated that without the timely intervention of the Akufo-Addo administration, the banking sector would have faced a collapse.
He emphasized the crucial role played by the Akufo-Addo administration in preventing a potential collapse of the banking sector in Ghana. According to Professor Boadi, the timely intervention of the government was instrumental in stabilizing the sector and restoring confidence among stakeholders.
The decision to recapitalize some banks and clean the sector was the best. The entire sector would have collapsed if the Finance Ministry had not undertaken that cleanup exercise in 2017.
He elaborated that the restructuring of the banking sector was based on a report inherited by the newly inaugurated government and needed to be addressed promptly.
In the year 2015, the Bank of Ghana assessed all the banks in the country. The Assets Quality Review exercise found out that ten (10) banks were in crisis and had to be folded up.
He stated that the ten banks encountered difficulties due to insolvency caused by insufficient liquidity, mishandling of funds provided by the central bank, and the lackadaisical approach towards overseeing the mismanagement of these banks by the supervisory division of the Bank of Ghana.
Per the Assets Quality Review Report, the crisis-laden banks ought to have been collapsed or consolidated, but this was never done. The Akufo-Addo administration only came to implement the recommendations of the report, hence, the cleanup exercise.
He mentioned in the report that third-party transactions were one of the factors contributing to the challenges faced by the banks. Instead of being used to support the struggling banks, the funds were diverted to establish new banks and ventures unrelated to banking, ultimately impacting the capital ratios. Additionally, he pointed out that loans were extended to specific individuals without any collateral.
It is important to state that the delay in the implementation of the recommendations of the Assets Quality Review Report adversely contributed to the level of crisis the Akufo-Addo administration came to meet in the banking sector.
He reiterated that the banking sector had no alternative means of rescue other than the method that was implemented. During the previous administration, the Bank of Ghana provided financial assistance to struggling banks multiple times. Unfortunately, these funds were squandered by the banks’ owners and managers, leading to further financial distress
The then Bank of Ghana Governor’s delayed intervention allowed financial malpractices to go unchecked for too long, exacerbating the crisis in the sector. Blaming Akufo-Addo is unfair, for he rather saved the sector contrary to what some people have been saying.
The Bank of Ghana initiated a banking sector clean-up in Ghana in August 2017 to stabilize and fortify the banking sector. This clean-up formed a crucial part of the BoG’s responsibility to bolster economic growth by ensuring the stability and health of the financial system.
