Government’s special programme to rescue five indigenous commercial banks that failed to meet the Bank of Ghana’s GHC400 million minimum capital requirement, should have come earlier, Economist Professor John Gatsi has said.
This, the economist believes would have saved many local banks from collapsing or from being downgraded to savings and loans companies because “some of the activities going on at the banking sector are such that the more you stay at where you are, the more you deteriorate”.
Prof. John Gatsi said this during a discussion on issues surrounding the Ghana Amalgamated Trust (GAT) on TV3`s Key Points show.
He said, though government’s resolve to rescue the banks was in the right direction, concerns been raised by some industry players have to do with the legitimacy of the GAT and consultation prior to its implementation.
“The concern is about the legitimacy of GAT. It’s also about broader consultation. People in the industry were not consulted. The Bank of Ghana as a regulator who is supposed to guarantee is not about to speak to what they guaranteed,” he asserted.
According to the Economist, government is in compliance with the law by investing the Pensions Fund into the GAT but the failure on the part of the guarantors to consult stakeholders was wrong.
“Using Pensions fund the way it was announced isn’t against the law. If you look at the National Pensions Act (Act 766, section 175 and 176) it is very clear that when the Pensions Fund is invested in bonds or bills or any other securities guaranteed by the BoG – which we’re told BoG guaranteed, or guaranteed by the state, then Pensions Fund can be invested in those,” he indicated.
Prof. Gatsi explained that the GAT programme is not a support to the banks as announced by the Finance Ministry.
He stated that, “The agreement is actually not a support. GAT is a commercial investor in those local banks and the structuring of the commercial investment agreement is just like what Vulture Funds or what Private Equity Funds do to take hold of businesses that are actually suffering.”
He said this is a challenge and unlawful, stressing that, “You’ve gone to borrow to support the capital base of a bank, if you read section 9D of Act 930, it said when you’re capitalizing, borrowed funds shouldn’t be part of it so you set up GAT to go and borrow and come and support. To me, it’s a violation of this Act. So why should a government do that? To support the banks we all agree but why do you go and borrow to capitalize the banks. That’s one fundamental challenge with the arrangement.”
The Ghana Amalgamated Trust (GAT) which was announced by the Finance Ministry in January this year will support solvent and well-run indigenous banks, which were otherwise having difficulties meeting the new minimum capital requirement deadline, to meet their obligations.
The Agricultural Development Bank (ADB), National Investment Bank (NIB), OmniBank Ghana Limited / Bank Sahel Sahara Ghana (OmniBank / BSIC), Universal Merchant Bank (UMB) and Prudential Bank are the beneficiaries of the GAT programme.
According to government, the Ghana Amalgamated Trust (GAT), will raise money from Pension Funds to support eligible indigenous banks that successfully completed the due diligence process.
“Qualifying banks for GAT investment have been determined on the basis of their solvency, local ownership, minimum pre-investment capitalization of GHS120 million and an independent valuation by PwC. GAT has committed funds from pension funds and other investors, through a bond programme, with proceeds of up to GHS2.0 billion to be used for equity investment in the eligible indigenous banks, as determined by the investors. The bonds issued to the Pension Funds will be listed on the Ghana Fixed Income Market (GFIM) for liquidity purposes,” the statement said
In addition to providing capital for these banks, GAT also seeks to provide business development support in order to facilitate the strengthening of these banks both from a perspective of corporate governance and growth.
Watch the discussion below
By: Kekeli Kuatsenu / awakenewsonline.com