Takeover of two banks good for financial stability – Bankers

The Ghana Association of Bankers (GAB) has commended the Bank of Ghana (BoG) for instigating and presiding over a seamless process that led to the successful takeover of portions of the erstwhile
capital deficient and illiquid banks, UT Bank and Capital Bank.      
The renewed confidence in the sector should emanate from the
BoG’s timely intervention which helped to safeguard depositors’ funds by preventing the collapse of the banks, the Chief Executive Officer (CEO) of the GAB, Mr D.K. Mensah, told the GRAPHIC BUSINESS on Tuesday.

He was speaking to the paper a day after the BoG revokedlicences of UT Bank and Capital Bank, following their heavy deficiency in capital and liquidity.

Following the revocation, the central bank approved a purchase and assumption P&A agreement with GCB Bank to assume ownership of the deposits and select assets of the now defunct banks.

The action was in conformity with the demands of the Banks and Specialised Deposits taking Institutions Act, 2016 (Act 930), which was passed last year to help define a mechanism that the central bank can fall on to protect deposits whenever banks go through distress circumstances.

Speaking on the development in an exclusive interview with the paper, the CEO of the Bankers Association said although a difficult situation for management and owners of the failed banks, BoG’s action showed that the central bank was in a position to protect the deposits of the banking public.

“This incident should rather strengthen the faith of the banking public in the banking system. In other words, their deposits are protected,” he said.

“With this kind of thing (the revocation of the licenses and subsequent approval of the P&A), the deposits are safe. Instead of allowing the banks to fail, an arrangement is made and there is no run down,” he added.

Generally, he said the development was an opportune icing on financial sector stability, which had waned on the back of rising non-performing loans (NPLs) and the collapse of some non-bank financial institutions in the recent past.
It is hopeful that the swift and professional nature of the process would help bolster public confidence in the operations of banks and the financial sector in general.