When the Central Bank of Ghana cracked the whip amidst an unstable sector with too many banks
The Central Bank of Ghana continues in its effort to sanitize the banking sector. In particular, among some of the obvious sanctions it has carried out has been the compulsory acquisition of two privately owned banks: Capital Bank and UT Bank by the state-owned Ghana Commercial Bank under the authorization of the Bank of Ghana in 2017. Other activities have been carried out by the Central Bank of Ghana, the sector still needs some stability. Ghana’s banking sector is currently unstable, although its outlook looks good in the not-too-distant future if the central bank carries out significant regulations and activities.
The sector is still recovering from last year’s sanctions on the 2 banks, yet another bank has experienced direct sanctions from the central bank, thus Unibank, (was awarded as the 6th best performing company in Ghana in the awards Ghana Club 100 in 2017). Currently, the country’s Central Bank has announced that as of March 20, 2017, it ordered and authorized the dissolution of Unibank Management (privately owned bank) and its acquisition by KPMG. Curiously!
Now the Bank of Ghana itself needs some housecleaning. It is highly unacceptable to oversee an industry where a player is ranked sixth best only to say that he has been withholding some important data. The Central Bank, however, has its defense for the action against Unibank in that the bank has persistently maintained a capital adequacy ratio close to zero, which could nicely practically mean that Unibank is insolvent. Central Bank reports indicated that it ordered Unibank to desist from granting additional new loans to clients, however, the Bank failed to comply with the directive and continued to grant new loans. In addition, Unibank was ordered to desist from incurring additional capital expenditures to which they (Unibank) did not adhere, in violation of article 105 of Law 930.
It is true that Unibank has been a creative bank if one is to observe its banking activities over the years from a distance, as such the Central Bank and KPMG’s guidance to the bank must be one that does not dissolve its positive employee culture. -client who is easily seen “vibrating” between his clients and the bank. Unibank has some very loyal customers, and a large number are merchants. Bank of Ghana must therefore guide Unibank, taking into account the brand that exists and finding the obvious ways to revive the bank.
Having said this, the number of universal banks is too much for Ghana. The number should be limited as having about 40 banks for a population of 26 million is obviously a lot. What needs to be done is to develop the capacity of existing banks to “branches” customers. This can be done in two ways: expanding physical infrastructure to get closer to customers and expanding digital infrastructure (online/mobile banking). Existing banks should be interested in improving their service experience, getting closer to people, expanding digital means of banking and improving banking security.
However, to make it clear, I am in no way against registering banks. In fact, my position is directly opposite, since I do not forget the importance of financial services for people and the economy as a whole. My position will go the other way. My point of view clearly is that instead of registering new banks with some of them operating some branches without superior services or infrastructure, it would be better to provide existing banks with resources to improve their capabilities.
Ultimately, some of these financial institutions will have to consider merging should there be any chance of remaining profitable in business and serving customers to standards as the sector becomes more competitive in the coming years. and also especially now that the minimum capital requirement has been increased by the Central Bank to 400 million Ghana Cedis for banks, which will come into effect from December 2018.
