They questioned why the government was ready to borrow huge taxpayers’ money “equivalent to $6 billion” for the exercise, yet it failed to use a fraction of the money to settle the government’s debt to contractors, which largely accounted for the insolvency of the banks.

Describing the action of the government as discriminatory and predatory, they claimed that the clean-up had led to the unemployment of staff of the affected banks.

Press conference

Addressing a press conference centred on the recent developments in the banking and financial sector on behalf of the Minority in Parliament yesterday, the National Democratic Congress (NDC) Member of Parliament (MP) for Bolgatanga Central, Mr Isaac Adongo, quizzed: “Is it not clear to the Vice-President that it would have been cheaper to address the challenges from their roots while keeping jobs for our people?”

He was joined by other legislators from the NDC, including the Minority Spokesperson on Finance, Mr Cassiel Ato Forson; the Minority Chief Whip, Alhaji Mohammed Muntaka Mubarak, and the Ranking Member on Communication, Alhaji A. B. A. Fuseini.

Banks reeling

He said the capital adequacy of the sector had deteriorated from 21.8 per cent in January to 19.1 per cent in June 2019, while capital adequacy as measured by Basel II/III had worsened sharply from 17.5 per cent in January to 16.3 per cent by the end of January 2019.

He stated that the banking sector was reeling under the strain of the implementation of International Financial Reporting Standards because the recapitalisation process ignored the cleaning up of the balance sheets of banks, saying that would have been achieved if BoG had implemented internal capital adequacy process (ICAAP).

“What we are seeing is the erosion of the capital of these banks through write-offs of toxic loan assets on the books of the banks, which could lead to another recapitalisation,” he stated.

Weakening liquidity

The Bolgatanga Central MP noted that currently, banks were struggling with weakening liquidity as measured by the BoG liquidity indicators.

For instance, he said, core liquid assets to total assets had deteriorated from 26 per cent after recapitalisation to 23.9 per cent, while core liquid assets to short-term liabilities had deteriorated from 34 per cent after recapitalisation to 30.6 per cent.

“These are very worrying signs, especially given the level of panic withdrawals in the financial sector,” he stated.

According to him, the banking sector had been able to lend only GH¢2.7 billion to businesses and households since January to June 2019, saying “this means an average of GH¢450 million loans a month”.

“No wonder businesses are struggling to raise funds to expand their operations and create employment for the teeming unemployed youth,” he said.