There is something wrong with the way things are done in this country. In some countries, laws exist to prevent officials of regulatory bodies from engaging in business in the sectors they superintended over. It looks like we have overlooked this and it has made it possible for former chief executives of regulatory bodies to take up directorships in companies that were under their control.
The mining industry has seen some of this and the banking sector has several examples. In fact, it is not very clear to me how former governors of the central bank easily got banking licences. Did they go through the stringent rules as is expected of applicants or they were treated with kid gloves.
It is for this reason that one would want more answers because we live in a country where one is not sure of who is telling the truth. Thus, as a people concerned with the banking sector, Ghanaians need to demand further and more particulars from the Bank of Ghana on the issue of the closure of the distressed banks. It is not enough to issue press releases to explain a point or two about why these banks were closed down. In fact, these closures, though purported to be in the interest of the sector, are becoming worrying.
In fact, there is something seriously wrong with the way the Bank of Ghana has closed down the distressed banks. The first question is, what has the Banking Supervision Department of the BOG been doing? If they did their work well, some of these issues would have been identified long ago and answers found to address problems that were pushing the banks down. Since no official of the Banking Supervision wing has yet been fingered, one can assume that they were working well.
If that is the case, and no case was found against these banks over a long period, apart from what we are now being told that some of the banks received assistance from the Bank of Ghana, what was done to ensure that they did not go down?
Could it be that the banks are suffering from some kind of fatigue because of their small sizes? In 2004, the former Governor of the Central Bank of Nigeria, Charles Soludo, identified size as one of the problems militating against banks in that country. The truth is that because of their size, they were not able to capitalise enough to meet the demands of modern day banking. That was the reason why the CBN restructured the sector.
What we did in Ghana was to watch on and then allow more banks to enter the sector. This is what we are paying for. One of the questions that one can demand answers to is whether or not, staff of the Banking Supervision Department were not colluding with some of these banks? Until UT Bank went down, its directors and the bank won several awards and were touted as the best thing to happen in the country. The same can be said about Capital Bank. If the staff of the Banking Supervision Unit did find issues with these banks, were people punished? If not, why?
The other issue is what are the standards for the issuance of banking licences in this country? Is it that once you have some money to spare, you can just apply for the licence and presto, it is granted and you start operating? If this is the case then, something is wrong because banking is more complex than we see. It is not just a case of renting an office space, hiring a few staff and then putting them to work!
When the Nigerians were discussing the problems with their banking sector, one issue that they talked about most was the ownership of the banks. We have a similar case in Ghana where some people just want to enjoy the position of chairmen and directors of banks without having a clue regarding what is expected of them. This is not helpful to the economy because if we really allow the banking sector to work, we would be able to provide the capital to support job creation by assisting entrepreneurs to create jobs.
Unfortunately, what we have now are just offices where staff are made to look for people with big cash to open accounts and then, the banks pretend to be trading with these monies. Sadly, some of the officials in these banks too, have not been professional with their work because they did not do proper due diligence before offering loans to people who never paid back. These defaulters are not chased to complete repayment of the loans contracted because they have paid part of the loans as kick-backs.
There are other problems, too numerous to list here, that have contributed to destroy our banks. That is why l do not understand the argument from some quarters that we should not allow local ownership of banks to die. What this means is that we should allow mediocrity to continue in a very specialised sector. The time has come for every Ghanaian to know that banking, though with a retail aspect, is far different from ordinary retail business where one person can open a shop and start operating. Since it is a specialised area, we must police it properly so that it can grow for the country to benefit.
One way that we can do this is to increase the capital base of these banks so that it is not just anyone who can open a bank. For those banks already in existence, they must be made to understand that it is very important for them to merge their operations in order to grow. A chairman with small proportion of shares in a bank with clout is better than a chairman with a hundred per cent shares in a bank that is not working properly and therefore preparing itself to be distressed.
Against this background, if it means foreign banks taking over our local banks to make them efficient, let it be so. What we can do is to take the necessary steps, so that those who come in do not use loop-holes in the system to siphon money out of the country. We also need to strengthen the staff of the Banking Supervision Division so that they can play their proper roles. It does seem that there is some truth in what Soludo told Nigerians in the past that it would be better for the country to have just seven banks and to have a capital base that can support local companies to grow.
Ghana can take the same route. With a strong banking sector, l can foresee our local construction companies receiving assistance to take up jobs in the West African sub-region. Others have done it and it is not magic, it just depends on simply planning, keen eyes to ensure people operate properly and then, ensuring that corruption is killed from the system. If we do not change, we would not be able to correct the deficiencies in the banking system. Many banks would go into the distressed mode and be closed and yet, nothing will change in the system. May God help us to see the need to bring about the necessary changes.
…with Francis Kokutse