The “irresponsible” decisions taken by the Akufo-Addo government in relation to the banking sector are what “aggravated” the banking sector crisis which led to the collapse of nine local banks and loss of jobs, a former Deputy Finance Minister in the Mahama administration, Fifi Kwetey has said.
The licences of nine local banks were revoked within two years under the Akufo-Addo government as part of a financial clean-up exercise. Also, 347 microfinance companies, 23 savings & loans firms and finance houses, as well as 53 fund managers, had their licences revoked by the central bank and the Securities and Exchange Commission (SEC), respectively.
At a town hall meeting on Tuesday, February 11, 2020, Vice-President Dr Mahamudu Bawumia blamed the crisis on the Mahama administration, saying: “Indeed, the current central bank leadership inherited what was pretty much like a body with a cancer in the toe”, explaining that the Akufo-Addo government’s intervention to clean up the sector was timely to avert the worst.
“If you don’t give up that toe in time to end the rot, you’ll soon move from one with a rotten toe to one without a leg because the rot will eventually spread to your hip and then you are going to have to lose the entire leg”, Dr Bawumia illustrated.
The Vice-President said: “The swift and decisive action taken by the new management team at the Bank of Ghana provided relief for the financial system as a whole through the funds provided by the government for deposit payouts. Ladies and gentlemen, let us remember that the failures of these financial institutions which we witnessed were a direct result of a system of poor licensing, nonexistent capital, weak corporate governance, related party transactions and so on and this has actually hurt so many people – depositors and employees alike”.
In his view, “The NDC government and the previous management of the Bank of Ghana had ample time to address the impending failures; they were aware of the problems in 2015, in the case of banks, and as far back as 2012 in the case of savings & loans and microfinance companies”.
Responding to the Vice-President’s assertions on Class91.3FM’s 505 news programme on the same day, Mr Kwetey said the Akufo-Addo government is being too noisy about its intervention in the sector, noting that the Mahama administration met an even dire situation but handled it tactfully.
“When we took office in 2009, we had a situation where Ghana Commercial Bank was on the brink of collapse because of the huge indebtedness that was coming from TOR. Now, we did not allow Ghana Commercial Bank to collapse and bring about loss of jobs to its workers and bring about loss of deposits to the people who have dropped money there. We intervened and made sure not only that we saved Ghana Commercial Bank, saved the jobs of the people in that company across the country, but also in the process, saved TOR, safeguarded the economy, and we did that without a lot of noise, without a lot of this plenty noise that is being made by our friends.
“And that’s not all: this country has had many years of legacy debts coming from the energy sector that threatened to collapse the whole banking sector. What did we do? We dealt with it without allowing any banks to collapse, without jobs to be lost and I’m talking about billions that we had to deal with. That’s what you do when you’re concerned about a country”.
“You don’t come into office and then when you see a problem in the banking sector, you aggravate it by taking decisions that are absolutely irresponsible without taking time to know the interconnectedness of all the various banks and financial institutions and knowing that if you cut the head, you are going to kill the rest of the body, you don’t do that”, the Ketu South MP said.
“But these people [Akufo-Addo government]; what did they do? They caused panic and fear by taking decisions on an ad hoc basis without even knowing the totality of the picture. And then when you do that, you sew panic in the system and then people are going to start running on various companies, some of them were running on banks, some of them were running on savings and loans, some of them were running on microfinance companies”.
“And to add insult to injury, critical expenditure, the critical payment that government was supposed to be making to many contractors who were owing a lot of these banks, government failed to do so and then after you’ve caused all this haemorrhage, you cause of this bleeding, you cause of this loss of jobs, you cause all this headache to people, you turn around in an election year and say that you are going to look for money and pay the people and you expect people to clap for you? Really, clap for you? After all this? Something that the NDC met a bigger problem; take, for example, the energy sector debt was affecting, crippling the whole financial sector, we solved it with minimum noise and you have massively caused this problem and you expect people to clap for you? Our friends have to get serious; the Vice-President has to get serious”, Mr Kwetey noted.