The economist and spokesperson for the Vice President Dr Gideon Boako says critics of the Bank of Ghana’s clean-up of the banking sector, have failed to present possible solutions for the crisis that confronted the country’s financial sector.
Speaking on Point Blank on Eyewitness News on Citi FM, Dr. Boako stated that the Bank of Ghana inherited a financial sector that was facing an existential threat with a number of banks heavily dependent on emergency liquidity support.
“The acid test to any political decision is what is the alternative. When we came, they had started on the path of doling out taxpayers’ money in the form of liquidity to support some of these institutions.”
“Some of these institutions, they had supported with liquidity to the tune of GH¢800 million and over a billion cedis for years, and we didn’t see any results. That was a lazy approach because the money was not coming from them, they were just pumping it out,” Dr. Boako stated.
According to him, following the investigations conducted in the aftermath of the clean-up exercise, “evidence has also shown that most of this liquidity support, one way or the other, owners of the institutions used them for their personal gains. So people were using public funds for their gains and nothing was happening to them. We could not go on like the same path; we wanted to show an alternative to whatever they have done.”
“The alternative here is to do the things that we have done like increase the minimum capital requirement. Those who cannot afford may go into mergers.”
The banking sector challenges, he argued, had to be confronted head-on, and that the Bank of Ghana did what was needed to protect the entire system from collapse.
The central bank over the last two years has embarked on reforms which led to the license revocations of nine banks with a number of directives issued to strengthen the management of banks, and bring them onto the path of profitability to support the economy.