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Many analysts wonder why, however, the banks in question should provide better answers than the BoG.
The clean up in Ghana's financial sector has seen yet another set of casualties, as two banks got there licences revoked.
Central Bank of Ghana on Saturday disclosed the revocation of the operating licences of both Premium Bank and Heritage Bank.
For Heritage Bank, Addison explained that while the bank which was licenced in 2016 was not insolvent, there were anomalies with its licencing, the source of its initial capital and related party transactions. The bank's main shareholder is Mr Seidu Agongo, the Chief Executive Officer of the Agricult. Mr Agongo is standing trial alongside the former Chief Executive Officer of the Ghana Cocoa Board for financial offences, including causing financial loss to the state.
Ernest Addison, Governor of Bank of Ghana, said the two years long banking sector cleanup had come to an end, leaving 23 universal banks out of an initial 35.
While Premium Bank had continually breached the capital adequacy ratio(CAR) requirements since December 2017 making it insolvent. It had also not been able to meet the new minimum capital threshold of about 83 million U.S. dollars as of the December 2018 deadline.
For Heritage Bank, Addison explained that while the bank which was licenced in 2016 was not insolvent, there were anomalies with its licencing, the source of its initial capital and related party transactions.
Assets of the two banks have therefore been awarded to the newly-established Consolidated Bank of Ghana (CBG). This brings to nine the number of banks which collapsed under the sector reforms which started in 2017. While assets of two of those banks were awarded to the Ghana Commercial Bank (GCB), seven have been consolidated under the CBG.
Earlier, the local branch of Bank of Baroda, an Indian international bank, was also liquidated early this year and its businesses taken over by Stanbic Bank, local branch of Standard Bank of South Africa.
The banking sector in Ghana is lazed with three major challenges: non-performing loans (NPLs) stemming from the 2015 energy crisis, slow credit growth to the private sector and an overcrowded market made up of undercapitalised small banks. President Nana Akufo-Addo discussed these issues in his speech at the 60th anniversary celebration event for the central bank, the Bank of Ghana (BoG), in August 2017 – four days after the BoG had been forced to oversee the emergency takeover of two local banks, as their insolvency issues were deemed beyond remediation.
Although President Akufo-Addo praised the bank for ensuring price stability, creating an enabling environment and for its timely response to recent bank failures, he also added a note of caution: “The current weaknesses in our banking sector need to be addressed forcefully to minimise any adverse financial consequences to unsuspecting savers, and their spill-over effects on the economy.”
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