It is a fact that the banking sector crisis and the approach to resolving it as well as the effects on indigenous banking space, businesses and individuals will remain topical especially as we await levels of pass-through effects.
Banking and financial sector crises have “cause and effect” dimensions. How to resolve such crises rest on the quality of assessment and approach to the resolution.
Political association of the causes and resolution has never proven to be the best approach. It is fruitless to use the political association approach as problems identified when NDC was in power are the same when NPP assumed the governance of the country. For example, if the revocation of licenses were due to inadequate and inappropriate capital, then this affected the two parties as the banks’ final licenses were granted to Construction and Beige Capital in 2017 with ceremonies graced by top government officials including the current governor.
Let us be guided that the opening sentences of Sections 9 and 16 of Act 930 is that a final license to operate a bank is given when the Bank of Ghana is SATISFIED. In section 16, notwithstanding the said satisfaction by BoG, if it is discovered later that the applicant for licenses provided false information on a material requirement such as capital requirements, the BoG is empowered to trigger its regulatory provisions to punish and the punishment may include revocation of license. The implication is that even in the presence of first-class due diligence and professionalism the regulator or officer in charge may be misled or provided with false information.
In the face of the above why treat the banking sector issues with an approach tainted with political pronouncements. Again from the above except in very clear circumstances where an officer of BoG personally acted incompetently, recklessly, unprofessionally, all those expecting prosecutions of BoG officials should note that that will not happen merely because a bank collapsed. Even when they are charged with any offense, the state must prove a lack of professional judgment, knowingly engaging in reckless professional duty and fraud. Unless we want to say that because a governor or deputy governor signed final licenses they are guilty of causing the collapse of banks. That understanding will mean the current governor and previous governors should be before the court now but it doesn’t work “ like that”.
If this understanding is the case why would one major on political association? To solve financial sector problems of the scale currently going on, comprehensive identification of documented causes, scenarios or portfolio of documented solutions with right orientation, objective and comprehensive estimates to resolve the problem using any of the scenarios must be conducted.
In my opinion, the comprehensive identification of causes was done between 2014/2015 and was also captured in various IMF reports. The causes identified led to many legal reforms in late 2015 and 2016. Most of the non-performing loans were linked to energy sector indebtedness to banks which negatively affected their liquidity. Also, general fiscal management challenges and regulatory management across the banking and non-banking financial sectors were clearly identified. To address these issues the following Acts were put in place in preparation to activate the process for the final steps to deal with the problems.:
A. Energy sector levies Act
B. Public Financial Management Act
C. Banks and Specialized Deposit-Taking Institutions Act
D. Depositors Protection Act
E. Securities Industry Act
What was left to be done is the implementation of the laws by doing a comprehensive budget for the process from a principle-based perspective for the implementation across the industry. This is where we failed in the structured process being followed until 2017. An indication is that by the time the BoG started the collapse now termed cleanup, there were no comprehensive financial estimates for the process approved by parliament. You will recall parliament conducted some bipartisan investigation into the exercise because not even parliament was well informed about the exercise. In the process, the approach adopted led to a violation of SEC laws in some cases. Also violation of the very corporate governance rules. Public financial management laws, the rights of people and by so doing we began a cycle of panic which triggered acute liquidity problem.
The reality, therefore, is that very clear steps were taken from 2014 till 2016 and continued from 2017 by the new administration. As to whether the approach from 2017 is the best will continue to occupy the discussion space either professionally or politically. It is clear that the effects of the cleanup are assuming legal issue, political, health and psycho traumatic experience for some. The narrative is changing over the past few weeks where politicians and known supporters of both NPP and NDC are complaining about the negative effects. Even people who were supporting the cleanup approach from 2017 have started complaining about it.
Whatever is convenient for any stakeholder will not take away the fact that job savings are an infinitesimal portion of joblessness created in the financial sector and real sector of the economy as a result. The effect on entrepreneurial finance and stock market performance is no more difficult to assess.
The scale of psychological and displacement can not be underestimated. This crisis has moved more people above the poverty line to below poverty line with a high degree of vulnerability within a short period of time for some families.
No matter how well-intended the approach, the Government should work hard to restore the smile of Ghanaians and the opposition parties should bring their best brains together to promise how they can bring back the lost smile.