After the former-deputy Governor of BoG, Dr. Johnson Asiamah heavily criticized the current leadership of the BoG for their modus operandi in the banking sector cleanup, the Central Bank has hit back.
Dr. Asiamah had alleged that under the erstwhile John Dramani Mahama administration, the BoG was to embark on a similar clean-up exercise which would have cost the country far less than the current exercise did.
But the Bank of Ghana is refuting the claims insisting there is no evidence or record to the effect that the Mahama-led administration intended embarking on a clean-up exercise of any sort, ABC News can report.
According to the Central Bank, the initial banks that had their licenses revoked, Capital and UT were found to be insolvent as far back as 2015 after Asset Quality Review (AQR) was conducted. These signs of insolvency were confirmed in 2016 after another AQR was conducted under the former management of BoG.
Portions of the statement released by BoG read, “UT Bank and Capital Bank were among the banks that were found to be insolvent after the May 2015 and June 2016 Asset Quality Review (AQR). The two banks had ample opportunity after the AQR to raise the needed capital to restore capital adequacy to the regulatory minimum
but failed to do that. ”
However, with the detection of insolvency of these financial institutions made explicit by the AQR, the former management of the Central Bank sat aloof without taking any proper measure to avert the looming the danger. Although the management of BoG had legal backing to take drastic measures to salvage the situation as provided by the Banks and Specialized Deposit-Taking Institutions Act, 2016, Act 930, they sat unconcerned as the mess compounded. BoG maintains that, “we have no evidence on record to show that the previous management took steps to mitigate the risk of ultimate failure of these institutions, as it was required to do under the Banks and Specialized Deposit-Taking Institutions Act, 2016, Act 930 which came into effect as far back as in September 2016.”
The Central Bank in its statement adds that the rather disturbing situation in 2015 drew the attention of officials of the International Monetary Fund who made several recommendations to the management of BoG for action to be taken.
“While under Ghana’s ECF programme with the IMF which started in 2015, the IMF provided recommendations on how the banks determined to be distressed under the AQR were to be handled to avert a financial crisis, the then management of the Bank of Ghana failed to implement these actions that would have halted the eventual collapse of a multitude of financial institutions…The then management of the Bank of Ghana turned the other eye, while loading the insolvent banks with massive amounts of liquidity support including by passing such liquidity support through other banks as conduits and taking no steps to ensure that such support was used for the benefit of providing liquidity to depositors”, the BoG’s response read.