Ghana’s economy needs just about five well capitalised banks , Financial Analyst, Sydney Casely Hayford has said.
His comment comes days after the Bank of Ghana gave GCB Bank the go ahead to take over UT and Capital Banks to save them from collapse.
The Bank of Ghana announced that the takeover of the two banks became necessary “due to severe impairment of their capital,” and media reports suggest there are seven other banks that are also distressed at the moment.
Speaking on Citi FM’s News Analysis Programme, The Big Issue, Mr. Hayford said the challenge of indigenous banks collapsing due to insolvency will be non existent if Ghana had fewer banks.
He believes “fewer banks with bigger capital bases” will always ensure “bigger and better lending.”
Prior to GCB taking over Capital and UT banks, there were a total of 36 banks operating in the country, with 19 of them being indigenous.
Many who however believe the number was too huge have heightened calls for the Central Bank to tighten regulation by cutting down the number.
8 banks on the verge of collapse – Bawumia
In 2016, the then running mate of the flag bearer of the New Patriotic Party’s, Mahamadu Bawumia had warned that eight banks in Ghana risked collapse due to the continuous increase of bad loans on their books and the fragile economy.
He said these eight banks were identified to exhibit significant weaknesses with capital adequacy ratios of below 10 percent and some below 5 percent and nearing collapse so it is a real problem.
Dr. Bawumia also made reference to the Bank of Ghana’s first financial stability report for 2016, which revealed that bad loans on the books of commercial banks in the country increased by 14.9 percent to GHc 4.52 billion in 2015 against the GHc 2.72 billion recorded in 2014.
This was after the Bank of Ghana, in its first financial stability report for 2016 revealed that bad loans on the books of commercial banks in the country increased by 14.9 percent to 4.52 billion cedis in 2015 against the 2.72 billion cedis recorded in 2014.
The central Bank earlier admitted the growing spate of nonperforming loans on the books of banks is the key risk facing the banking sector.
Source: Citifmonline.com
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I do not agree on the fewer banks theory. with all these banks how many of us have bank account? we need the Ghana id and a credit reference agency,which will be compulsory for all banks, so that credit worthiness of customers will be known before a loan facility is granted. i will not be surprise that a customer who is delinquent in paying his/her debt in UTBANK will not be the same in CAPITAL BANK. that is part of the problem. in country that saving culture is low, and u need a minimum of ghs 50.00 to open and maintain a account. u cant withdraw below the minimum amount, as for interest forget. yet some banks have made it possible to open with ghs 20.00 and u can withdraw all . in some banks u open an account without money. something is fundamentally wrong with our whole banking system. we must think beyond the box.can i ask what collapsed co-operative bank and bank for housing? if we do not deal with "that" which bank will be next. oh Lord have mercy on Ghana.
Igp, I totally agree with you. This Casely Hayford guy hmmmm. I don't know why Citi Fm keep destroying their brand by giving him the platform to air these hollow and backward theories. the most embarassing thing is the way they usually introduce him, "Financial Analyst" This guy is so hollow that he hardly makes any sense. Sometimes you can hear him struggling hard to be be seen as a Hard-Talker but the more he does that, the more he sounds ridiculous. Mtcheeewww, let me even stop wasting precious time on this guy
I totally agreed with "lgp", a previous contributor, but started saying things that are either not related to Caseley Hayford's comments or indirectly at best. It is not the number of banks that matter, otherwise we may have to cut down the number of market women that sells tomatoes at Makola. The basic issues are a healthy, very solvent and diversified banks that can meet the DEMANDS of the banking and financial needs of industry and individuals in Ghana. We also need to tighten our regulations to be able to effectively and proactively kick out less performing banks and set the tone for more mergers and acquisitions. We should remember that developing as we are the financial needs of industry are diverse and the perception is that no bank wants to take risk but how the loans are not paid in Ghana must be a(TOPIC FOR FULL AND IN DEPTH INVESTIGATIONS IN THE COUNTRY"
I totally agree with you. There are too many financial institutions and less manufauring. UK with 80 million population don't have 35 high street banks plus all these micro finance. They have to scale down otherwise what happened to UT and Capital Banks will happen again.
I totally disagree. We need to expand instead of vice-versa. Period!
Casely Hayford sometimes sounds too retrogressive instead of being progressive ancd its a fair statement. A free market place allows the forces of economics of scale or market forces to determine the pace and not monopoly or oligarchy to dominate the financial market place. Like the Darwinian theory of the survival of the fittest, only the strongest will survive in the competing financial markets while the weaker ones will either be absolved or forced into mergers/acquisitions. Nothing wrong with that. We are not under dictatorship but a Republican constitution in which every element in the system is deemed to virtually have an equal stake in the pie. Economics of scale and market forces dictate the pace of growth with government as umpire, ensuring fair play and as a regulating authority, exercising its due control of the market place. Ghana needs more quality banks not just few but very good ones and competitive too. Casely are you a socialist? Nothing wrong with that but even the Peoples Republic of China seem to have come very far to understanding free market system albeit, was once a communist and centrally controlled market system. "Forward ever, backward never" and i quote the Great Political Philosopher and prophet, Dr. Kwame Nkrumah. Ghana has been on the match forward since Nkrumah's days and we are not going back, Casely. Akuffo Addo and his UGCC/UP group can disagree with Nkrumah, he still remains the Founder of The Republic of Ghana. The prez can choose to lead his imaginary " banana republic he calls 'republic.'" If Akuffo Addo does not like the name Ghana, he can call for a referendum to rename Ghana The Gold Coast and see what the fortunes of NPP will be come December 7, 2020. Good luck NPP and your old politics of: "its either UGCC or no independence"