The Bank of Ghana (BoG) has clarified the controversies surrounding the financial sector clean-up, which cost the country about GH25billion.
According to the governor, Dr. Ernest Addison, the GHS25 billion used was not for the banks alone, but it covered the entire financial system clean-up.
“I hear statements like we spent so much money to clean up banks, but you don’t compare apples with apples, because that GHS22 billion or GHS25 billion that is quoted was not the amount spent to clean up banks alone.
“It was the amount spent to clean up banks, savings and loan institutions, microfinance institutions, and institutions that were licensed by the Securities and Exchange Commission (SEC). So that’s the total financial sector cleanup cost”, he clarified.
The governor was answering questions at the 115th Monetary Policy Committee (MPC) press conference in Accra.
Dr. Addison further disclosed that the GH25billion was for the “entire financial sector clean-up, so when people make that comparison they are not comparing apples with apples. In particular, the Specialised Deposit-taking Institutions (SDI) cleaning can be very expensive, with the banks they are able to recover assets, the receiver is working on recovering assets from the banks”.
According to him, the micro-finance institutions, as well as the savings and loan institutions that were shut down during the financial sector clean-up had no assets.
Dr. Ernest Addison added that most of them had just dissipated depositors’ funds and it was impossible to find what those resources were used for.
He further noted that what even made it more expensive was that everyone who had savings with the affected banks got refunded in full, which under normal circumstances does not happen anywhere.
His outfit, he revealed, has set up deposit insurance arrangements, which will make sure that you get some payments if your financial institutions goes into distress, but the challenge, he bemoaned, was that Ghanaians are used to getting their deposits refunded fully and that makes it very expensive to the budget.
Background
Last year, the Finance Minister, Ken Ofori-Atta, said over GH¢25 billion was spent by government to clean-up the banking sector. According to him, the move taken by government was to secure the funds of depositors, as well as strengthen the financial sector.
It would be recalled that the Bank of Ghana in 2017 closed down some financial institutions in the country. This was after it revoked the class 1 banking licenses of nine banks during the financial sector clean-up.
The UT Bank, Capital Bank, Sovereign Bank, Beige Bank, Premium Bank, The Royal Bank, Heritage Bank, Construction Bank and UniBank were the affected banks, while some banks were later merged to continue operation.
This generated some controversies in the public space as to why a GH¢4 billion problem was made to cost the taxpayers GHS25 billion.
Some were of the view that these banks were asked to capitalize to the tune of GHS400 million, and yet with the closure of banks, we incurred a public debt of GHS25 billion.
