The Bank of Ghana(BoG) yesterday announced it had merged 5 banks into an entity named Consolidated Bank Limited. The five banks, Construction bank, sovereign Bank, Unibank, Beige Bank and the Royal Bank were found to be insolvent after the BoG which has oversight responsibility audited their books.
In 2017, two other banks, UT bank and Capital bank were merged with GCB bank for being insolvent, bringing the total insolvent banks to seven.
Many Ghanaians have expressed concern and of course some political parties are riding on the back of the issue to score political points, claiming incompetency on the part of the ruling government.
What would have happened if these banks were allowed to fail completely?
Most these banks had non performing loans while others cooked books to look compliant to BoGs minimum limit of GHC400Million capital. Obviously the previous government failed to give its political backing to the BoG to act in order to save face. Now that the BoG have the political backing to act, we can all smell the rot.
In 2008, American taxpayer’s money had to be used to save banks who had been cooking books and breaching accountability rules and ethics. The Banks had invested massively in the housing industry by giving out cheap loans to finance mortgages during a boom. Then it all went crashing down and government had to step in.
BoG is trying to avoid such a situation and effectively save customers savings kept in the banks. BoG learnt it’s lessons from the DKM scandal and I’m afraid this won’t be the last we hear of banks being insolvent.