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In a banking crisis where the resolution has implications for for tax payers (fiscal cost), restoration of both domestic and cross-border confidence as well as job losses while protecting depositors, stakeholder approach is the best mechanism so that Parliament, Government and Bank of Ghana work together with approved Parliamentary package for the process.
The Bank of Ghana cannot find shelter under section 7 of Act 930 when in reality there is no emergency about the crisis. We are aware of the dangers and should have engaged before activating a program to save the banks. The political disunity about the resolution of the current banking crisis in which there is no engagement with parliament may generate future investigations.
He explained that managing a crisis is a project that needs proper engagement. He drew lessons from the approach adopted during the 1990s banking crisis in Sweden where parliament, government and the Central Bank worked together to the extent that the political opposition and government had a joint press release to assure depositors and provide better understanding of what is going to the finance committee of parliament He further explained that transparency in this process cannot be trivialized. He said a total fiscal cost of Ghc8billion of the seven banks can not be left in the hands of BoG and Government alone without active involvement of parliament.
On indigenous banks, he explained that the Banks and Special Deposit Taking Institutions Act regulates all banks irrespective of whether they are foreign or Ghanaian owned. However, salvaging distressed indigenous banks with no criminal acts is in our collective interest and the government should be practically interested.
Prof Gatsi revealed using Bank of Ghana sector report vol. 2.4 that there is urgent need to rethink about how to support indigenous businesses because in 2016 they contributed 76% to non performing loans(NPLs) and in 2017 contributed 78%. This he said means indigenous businesses’s inability to repay loans also affected indigenous banks negatively. He advised that our interest in indigenous banks should include rural and community banks because of their ability to finance indigenous rural businesses.
On the newly created, Consolidated Bank, the process of registering the bank, and whether the state own banks want to populate the banking sector are not clear. Parliamentary involvement is not known and parliament should be interested as this may be a serious violation of the role parliament should play .
….Prof John Gatsi said this @ Stakeholder forum on the current banking crisis in Ghana organized by Economy Times