The prediction of the collapse of banks as far back as 2015 was backed by data from the International Monetary Fund (IMF), Vice President, Dr Bawumia has said.
According to him, an Asset Quality Review study from the IMF revealed “Ghana’s financial system was very weak” whereas noting out that seven to eight banks at the time were at risk of collapsing.
This was revealed when the Vice President spoke in a radio interview while on tour of the Ashanti Region.
Dr Bawumia stressed that though his prediction was ‘rejected’ by the former president, John Dramani Mahama, the unfortunate omen was later corroborated by Mr Mahama.
“In his State of the Nation address when he alluded to the fact that the financial system was not being supervised well, he said this development, among others, led to the collapse of about 82 microfinance companies at the end of the previous administration’s tenure of office,” Bawumia said.
He described that the depositors of some now defunct Microfinance Institutions (MFIs) were in now way supported by the erstwhile Mahama admnistration.
Adding, the Bank of Ghana (BoG), at the time, had offered liquidity support to some of those institutions – which was committed to other purposes contrary to what it was intended for.
Dr Bawumia however said current data available suggests a weighty number of the depositors whose funds had been locked up as a result of the banking sector clean-up exercise have been paid, leaving about 3,918 – costing the country about GH¢21billion “which was not budgeted for”.
Meanwhile, the Finance Minister, Ken Ofori-Atta had earlier said most of the collapsed banks and financial institutions that became insolvent due to the financial sector clean-up exercise in 2017, were found to be ‘ponzi schemes.’
According to him, before the takeover of the banks by the BoG, some managers and directors of the banks were literally bankrupt yet were taking depositors funds and loaning them back for regeneration.
As part of its efforts to restore confidence in the banking and specialized deposit-taking sectors, the Bank of Ghana (BoG) embarked on a clean-up exercise in August 2017 to resolve insolvent financial institutions whose continued existence posed risks to the interest of depositors.
The clean-up saw the revocation of licenses of 9 universal banks, 347 microfinance companies, 39 micro credit companies or money lenders, 15 savings and loans companies, 8 finance house companies, and two non-bank financial institutions.
The move by the central bank was a comprehensive assessment of the savings and loans and finance house sub-sectors carried out by the BoG in the last few years after it identified serious breaches.