The Consolidated Bank of Ghana (CBG), according to Finance Minister Ken Ofori-Atta, has “made considerable progress in term of paying depositors whose monies were locked up” with the seven individual local banks whose licences were revoked by the Bank of Ghana (BoG) and subsequently morphed into the bridge bank in August 2018 that assumed the good assets of those now-defunct individual banks.

Presenting the 2020 budget to Parliament on Wednesday, 13 November 2019, Mr Ofori-Atta said: “The progress made by CBG, the jobs retained as well as the re-hiring of some of the staff of the now-defunct banks that were out of jobs, attest to the hard work the BoG, the Receivers and all stakeholders in the banking sector clean-up process to ensure that the resolution of the crisis was as smooth as possible”.

“We are confident that over the next months, the financial sector which is now on a sounder footing, will expand considerably and new jobs will be created”, he noted.

The minister said: “With the progress made by CBG, the bank has requested that the government consider and approve for it, articles of incorporation to be amended to convert it into a normal universal bank and not a bridge bank”.

Mr Ofori-Atta said: “The government has recognised the need to strengthen CBG and protect the jobs at this bank and has, therefore, given the go-ahead for CBG to undertake the needed regulatory process with the Bank of Ghana for it to be regularised”.

The minister also said Ghana’s banking sector is now “more resilient and well-positioned to support the economic growth agenda of the government” after the clean-up exercise in the sector.

The licences of nine local banks were revoked by the Bank of Ghana during the clean-up exercise which say the minimum capital requirement raised from GHS120 million to GHS400 million.

It effectively cut down the number of banks from 36 to 23.

In his address to Parliament, Mr Ofori-Atta said “following the successful completion of reforms in the banking sector which began in August 2017 and ended in January 2019, the “banks are beginning to refocus on their core mandate of financial intermediation based on their strong capital base after the recent completion of the recapitalisation exercise”.

According to him, “A well-capitalised, solvent, liquid, and profitable, and resilient banking sector has emerged with improved financial soundness indicators in line with expectations”.

“Even with fewer banks, asset growth within the banking sector in 2019 continues to be robust, underpinned by sustained growth in deposits and higher capital levels while credit has continued to recover compared to the same period last year.

“Mr Speaker, at the start of the reforms in August 2017, total assets were GS89.1 billion for a sector that had 36 banks, and two years after the reform process started, total assets have increased to GHS115.2 billion at end-August 2019 with only 23 banks”.

In the same direction, Mr Ofori-Atta said: “Total deposits have improved from GHS55.7 billion to GHS76.0 billion over the same comparative period, reflecting a stronger deposit base owing to more trust and confidence in the banking sector with fewer but stronger banks”.

“Banks’ profitability has also been greatly enhanced with a significant pick-up in profit after tax in 2019 compared to the previous year. The sector’s solvency remains strong, with the Capital Adequacy Ratio, even under the more stringent capital requirement directive under the Base II/III framework, well above the new regulatory minimum of 13 per cent”.

“Mr Speaker, similar to the banking sector and prior to the reforms, the specialised deposit-taking institutions (SDI) sector was plagued with acute liquidity and insolvency challenges. Their continued existence posed severe risks to the stability of the financial system and to depositors. As a result, in two separate clean up exercises the licenses of these insolvent institutions were revoked in order to curtail a spillover of these weaknesses to other sectors of the financial industry.

“Mr Speaker, insolvent specialised deposit institutions comprising 23 savings and loans and finance house companies, and 347 microfinance companies and Non-Bank Financial Institutions comprising of 39 micro-credit companies, one dormant leasing company and one dormant remittance company were also resolved in May and August 2019 respectively to safeguard the financial system against potential contagion and weaknesses in the SDI sector which threatened to erode the gains made in the banking sector”, he noted.

Additionally, the minister noted that: “It is important to note that although the clean-up exercises were completed quite recently there are already indications of improved performance within the SDI sector evidenced by improved capital positions, profitability, management efficiency and liquidity within the sector”.

“The completion of reforms within the banks and SDIs Industry in August 2019 was timely and paved the way for the operationalisation of the Ghana Deposit Protection scheme in December 2019. The scheme will protect the national budget from costs arising from banking sector failure, if that were even to happen in the future, and ensure that going forward all depositor’s funds are insured against bank and SDI failures. This scheme, supplemented by effective regulation and supervision by the Bank of Ghana, and the work of the Financial Stability Council, will go a long way to make our financial system more resilient and supportive of our efforts to foster inclusive socio-economic growth”, Mr Ofori-Atta added.

The central bank, he said, “Will continue to pursue policies and strengthen supervision to ensure that the banking sector remains well-capitalised, solvent, liquid and profitable and to also ensure that significant gains recorded in the aftermath of the reforms and recapitalisation exercise are locked-in. Credit risk management practices and loan recovery efforts will be stepped up to minimise overall risks in the banking sector”.