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19 July 2017

2 Commercial Banks On Verge Of Liquidation

Two commercial banks [names withheld] could soon be closed down by the Bank of Ghana (BoG) if they fail to secure emergency funds to recapitalize their operations.

The Central Bank is being forced to take this action as part of some requirements before Ghana can go to International Monetary Fund (IMF) Board for its fourth review meeting, scheduled for July 26.

JOYBUSINESS business, however, understands that due to challenges in meeting these prior actions, the IMF board meeting has been rescheduled for a later date yet to be announced.

How the two banks got here…

The two banks are currently in discussions with the BoG and the situation could change very soon, JOYBUSINESS gathered.

But according to persons close to this development, the move has been influenced by some pressure from the IMF that the Central Bank should move quickly to deal with the situation before the IMF Board meeting in Ghana can take place.

Persons close the regulator and inside government has argued that this is not a big deal and is something that they were working on, to address and had nothing to do with an IMF conditionalities.

The source said the basis of the actions is derived from a situational analysis report that was conducted by the BoG in 2015 with the new Banking law requiring the Central Bank to purge these banks.

JOYBUSINESS understands that have been times the BoG had to step in to help with some financial assistance with one of the banks.

The balance sheet of the BoG shows the extent of lending that the bank has been doing since 2015 to keep their head above water.

Sources say there was even an arrangement by one of the said troubled bank to even merge with another player in the industry but it all fell through at the last minute.

The two banks in question have also blamed the situation to their exposure to the energy sector, which is yet to be fully paid or settled by the government. They have explained that the situation was due to their own “reckless operations”.

Industry concerns

Some industry players are worried about the impact of the banking industry if indeed the BoG goes head with this action.

Just like the Bank of Ghana, they want to handle this issue tactically to ensure that it does not end up crippling the entire banking industry.

While some are calling for some form of bail out from government or even Bank of Ghana to help the banks to prevent them from collapsing, others are also calling on the Central Bank to actually push for the removal of persons who supervised the “financial crises.”

Some industry persons are also asking the questions; Did the Central Bank also fail to supervise effectively? Did the Central Bank watch all these things go on and decided to support the banks with more cash?

There are also calls for these two banks to merge if that could help address the situation.

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