International newswire Bloomberg is reporting that Ghana may have blown an astonishing GHC 20 billion (about US$ 3.5 billion) to bail out distressed banks in Ghana’s most controversial banking sector clean-up.
The Akufo Addo administration claims it had spent some government had spent some US$ 1.8 billion to recapitalise about seven collapsed banks, most of which are private banks.
Recently, Finance Minister Ken Ofori-Atta asked for an extra US$ 1.5 billion, saying it will be used to pay off depositors whose funds have been locked up in these banks.
“The West African nation has approved funding of about 16.4 billion cedis since 2017 to help recapitalize the industry and safeguard depositors’ funds after the central bank revoked the licenses of nine insolvent lenders and 23 second-tier institutions. The Bank of Ghana previously guaranteed 100% of funds deposited at banks, but only as much as 20,000 cedis per person for the customers of failed second-tier lenders, known as savings and loans companies,” Bloomberg stated in a report published late last week.
“The cleanup of the finance sector followed years of poor governance and weak regulatory oversight that risked the savings of 4.6 million depositors. While the bailouts helped to stabilize the industry, it also added to Ghana’s debt that was estimated to have risen to 63% of gross domestic product by the end of 2019, from 59% the year before. The country will head to the polls in December“.
Between August 2017 and December 2018, the central bank revoked the license of approximately seven universal banks for gross mismanagement by their directors and top executives.
The banks that have so far collapsed are UT Bank, Beige Bank, Sovereign Bank, Construction Bank, UniBank, and Royal Bank. All of these banks have been merged and taken over by State-owned Consolidated Bank of Ghana (CBG).
These banks have been consolidated into a government entity called the Consolidated Bank Ghana (CBG) and have gulped almost US$ 2 billion in bailouts from the government.
In addition to the seven collapsed banks, a total in excess of 300 different financial institutions in Ghana have lost their operating licenses and have consequently led to the loss of jobs for several thousands of workers.