Minister of Finance Ken Ofori Atta has defended the banking sector reforms that have led to the collapse of many financial institutions.
Government, he said, did not intentionally collapse these institutions.
He argued the institutions were insolvent as a result of their own actions and therefore the respective regulators were compelled to intervene to save over four million depositors and investors.
“Our commitment is to ensure that we provide relief to many of the victims”
“We acknowledge the pain and distress that has befallen depositors and investors, including pensioners, market women, churches who placed their confidence in these financial institutions,” he stated.
The Minister launched this spirited defense of the financial sector fiasco when he presented the 2020 Budget to Parliament on Wednesday.
Mr. Ofori Atta admitted the intervention to save depositors and investors’ locked up funds with the failed institutions has been very costly.
According to him, the government spent a total estimated GH¢16.4 billion, about 5% of GDP excluding interest from 2017 to 2019.
He said, “In 2017 and 2018, Government spent a total GH¢11.7 billion to safeguard the deposits held by universal banks that were resolved by Bank of Ghana, and to set up the Consolidated Bank Ghana (CBG) Limited.”
“These amounts were mainly through the issuance of government debt to both GCB Bank and CBG.”
“This year, Government had to again intervene to provide relief to depositors when the Bank of Ghana revoked the licenses of 347 Micro Finance Institutions, 15 Savings & Loans and 8 Finance Houses.”
“The total bailout cost estimate for this exercise was GH¢2.4 billion.”
“The Securities and Exchange Commission also revoked the licenses of 53 Asset Management Companies that were distressed, with an estimated fiscal cost to protect investors of GH¢1.5 billion.”
The Finance Minister stated that the government also provided bridge funding of up to GH¢800 million for Ghana Amalgamated Trust (GAT) to enable it to invest in four (4) indigenous banks to meet the minimum capital requirement GH¢400 million because they were struggling.
The interventions, he said, were timely to ensure the government safeguard the financial system, provide relief to families and businesses and protect jobs and local interest in the sector.
He stressed that with this clean-up the financial sector is now sanitized and therefore the public should have confidence in the sector.
Ongoing prosecutions, he said, will ensure that all those culpable, as well as negligent officials of the regulators, will face justice as soon as possible.
