Former President John Dramani Mahama has described the revocation of licenses of some financial institutions in the country as harsh and extreme.
The Banking sector has since 2017 seen series of clean up exercises carried out by the Bank of Ghana and the Securities and Exchange Commission.
So far, the sector has seen the collapse of over 400 financial institutions.
On August 14, 2017, the BoG in its press statement announced its approval for the takeover of two indigenous banks, UT bank and Capital bank by GCB bank.
BoG cited the insolvency of the banks in question, as the major reason for the revocation of their operating licenses.
According to the central bank, upon several agreements with the banks to increase their capital requirements, managers of the banks failed.
Consequently, to protect customers, the licenses of the banks were revoked under a Purchase and Assumption transaction with GCB bank.
Roughly after a year later, on August 1, 2018, the BoG again announced the consolidation of five indigenous banks to form a new bank called the Consolidated Bank Ghana Limited.
The five collapsed banks included Unibank Ghana, Royal bank, Beige bank, Sovereign bank and Construction bank.
The same insolvency reason was cited as a cause of the collapse of the various banks.
Mahama reacts
Addressing Ghanaians in a Facebook live video interaction, Mr Mahama explained that his government had seen signs that some of the banks were struggling but instead of closing them down, they rather decided to give them policy and monetary support as well as time to recover.
“When we were in government the red flag was being waved in the banking sector so we started the processes for bringing things back on track. Unfortunately, we left office before all those measures put in place could crystallise but a new government came to power and I don’t know whether they panicked or whatever happened but certainly the route they took was extreme, it was harsh and I think they have created more harm than they have solved.”
According to Mahama, the new minimum capital requirement of four hundred million Ghana Cedis led to the insolvency of most banks.
He argued that the posture of the BoG and government officials in putting pressure on the banks to fulfil the minimum capital requirement led to panic withdrawals in the banking sector hence the insolvency of the financial institutions.
Mr. Mahama added that he would work to restore the sector if he is voted into power.
Banking crisis: Money borrowed for clean-up could’ve saved banks – Minority
The government could have spent less than the almost GHc23 billion used for the financial sector clean-up on saving jobs instead of closing down financial institutions, the Minority in Parliament had insisted.
The financial sector clean-up commenced by the Akufo-Addo administration in August 2017 led to the collapse of nine universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, and two non-bank financial institutions.
The Vice President, Dr Mahamudu Bawumia, blamed the mess in the sector on what he described as the weak oversight of the Mahama government.
But former President John Mahama insisted that the National Democratic Congress began the cleanup by commissioning a report on the sector before losing the 2016 elections.
Addressing the press on Tuesday, September 3, 2019, a member of Parliament’s Finance Committee and MP for Bolgatanga Central, Isaac Adongo said the current government could have implemented the plan put in place by the Mahama administration to save the sector.
“The Ghanaian taxpayer would have been spared the high cost of this chaotic reform with Bank of Ghana if the Bank of Ghana had listened and followed the reform programme initiated by the NDC.”
