Reacting to the intention of the government to open a Treasury Single Account (TSA) with the central bank, the commercial banks stated that while they agree with the government to consolidate its accounts, it was imperative for the government to appreciate the fact that most of the covered entities were customers of commercial banks in the country.

Recommendations

Subsequently, the banks have recommended to the government to settle the exposure of its institutions and related projects to the various banks.

The banks are of the opinion that the government should continue to engage commercial banks in the TSA implementation to reduce the impact on the liquidity of the commercial banks.

Govt action

Earlier this week, the government explained that the TSA was expected to serve as an account into which all government cash, including money received by covered entities, shall be deposited and from which all expenditure of the state and entities shall be made.

However, the banks argued that: “Like any other customer, most of these entities have credit facilities from these banks while maintaining some deposit accounts with them; it will be lopsided if their accounts are moved without a corresponding settlement of their indebtedness.”

The banks also noted that a significant portion of the commercial banks’ funds had been advanced as credit mostly to the government institutions and related government projects with overdue repayments, adding that, “these facilities have over the years been provided to support the economy, which the government alone cannot undertake.

They said the transfer of the accounts without the settlement of the overdue credit to the government institutions and related government projects would create significant balance sheet mismatches and negatively impact on the financial sector in particular and the economy as a whole.

The banks again made it clear that “commercial banks in the country have been partners in the development agenda of the government; the banks have invested in and deployed robust infrastructure and branch networks throughout the country which were assisting government institutions in accessing their revenues in areas which would otherwise have been challenging.”

They maintained that the cost-benefit analysis of the investment decisions took into consideration the holding period of the government-related deposits, among other things, indicating that: “Any action, therefore, that denies the banks the benefit of deposits from such investments will have a negative impact on their operations.”

The banks made reference to their contribution to the real sectors of the economy, saying “the growth in the real sectors of the economy, stemming from credit advanced to the private sector and to institutions providing critical services, is likely to be adversely affected with the attendant political and social implications if this substantial source of liquidity is denied commercial banks. A case in point is the assistance the commercial banks provided to the energy sector during the power crisis.”

Govt’s delayed payments

In the statement, the banks also pointed to the delayed payments by the government and its institutions when credit was advanced to them, saying “commercial banks are saddled with the effects of delayed payments related to government projects and this is relatively accounted for by banks’ engagement in managing government revenue business in ensuring optimum value addition and excellent service provision. Further, various funds under management have been invested pursuant to contractual undertakings on the basis of which commercial banks have since leveraged the said sums.”

Currently, according to the aggrieved banks, commercial banks transmit balances of all government accounts on a daily basis to a designated SWIFT address which allowed the government to view all its balances via a single window.

“Commercial banks are in a position to partner with the government to offer IT solutions which will have guaranteed real-time access to named government officials responsible for managing government revenue,” the statement said.

The banks maintained that this would go a long way to assist the government to manage its financial resources in an efficient manner for the mutual benefit of commercial banks and the government itself.

Warning

The statement drew the government’s attention to the fact that banks and the government were partners in development and, therefore, any action that negatively affected their financial sector leading to erosion of public confidence in the sector would seriously affect the economy and the government.

“The banks reiterate their support for the government business by continuously providing fund management solutions that will ensure that a comprehensive rate of return is applied to all idle credit balances for the purpose of revenue maximisation and ultimate value creation,” the banks said.

They said given the government’s indebtedness to commercial banks and other concerns earlier raised, the banks were placed in a position which constrained them to meet the request to transfer government of Ghana account balances to the BoG.