When the Central Bank of Ghana cracked the whip amid a volatile overbanked sector

The Central Bank of Ghana continues its efforts to rehabilitate the banking sector. Notably, among some of the obvious sanctions he carried out was the mandatory takeover of two private banks: Capital Bank and UT Bank back by the state-owned Ghana Commercial Bank under the authority of the Bank of Ghana in 2017. still implemented by the Central Bank of Ghana, the sector still needs some stability. Currently, Ghana’s banking sector is unstable, although its outlook looks good in the not-too-distant future if the Central Bank implements major regulations and activities.

A sector that is still nursing wounds in relation to last year’s sanctions for 2 banks, and another bank experienced direct sanctions from the central bank, i.e. Unibank, (it was named the 6th best company in Ghana at the 2017 Ghana Club 100 awards). Currently, the Central Bank of the country announced that on March 20, 2017, it mandated and authorized the Management of Unibanka (privately owned bank) to dissolve and take over KPMG. Interesting!

Now the Bank of Ghana itself needs house cleaning. It is highly unacceptable to monitor a sector from which a player is rated 6th best just because he is said to have withheld some important data. The central bank, however, has its own defense for the lawsuit against Unibank that the bank persistently maintained a capital adequacy ratio close to zero, which could practically mean that Unibank is insolvent. The reports of the Central Bank state that Unibank was ordered to refrain from approving additional new loans to clients, however, the Bank did not comply with the directive and continued approving new loans. Also, Unibank was directed to forego any additional capital expenditures that it (Unibank) did not comply with, in violation of Article 105 of Law 930.

Admittedly, Unibank has been a creative bank if their banking activities over the years are viewed from a distance, as such, the Central Bank and KPMG’s guide to the bank should be one that will not break their positive employee and customer culture that is readily seen to “vibrate” between their clients and the bank. Unibank has several very loyal clients, a large number of whom are traders. The Bank of Ghana should therefore lead Unibank, taking into account the existing brand and finding obvious ways to revive the bank.

Having said this, the number of Universal Banks is too much for Ghana. The number should be limited because having close to 40 banks for a population of 26 million is obviously a lot. What needs to be done is to build the capacity of existing banks to “branch out” to clients. This can be done in two ways: by expanding physical infrastructure to get closer to customers and by expanding digital (online/mobile banking) infrastructure. Already existing banks should be interested in improving service experience, bringing people closer, expanding digital means of banking and improving banking security.

To be clear, however, I am in no way against the registration of banks, in fact, my position is the opposite as I do not forget the importance of financial services to individuals and the economy as a whole. My position will be the opposite. It is clear that my position is that instead of registering new banks, some of which operate several branches without superior services or infrastructure, it would be better if the existing banks use resources to improve their capabilities.

Finally, some of these financial institutions will have to consider merging if there is any possibility of remaining profitable in business and serving customers in accordance with standards as the sector begins to become more competitive in the coming years, especially now that the minimum capital requirement has been increased from by the Central Bank to 400 million Ghana cedis for banks, which will take effect from December 2018.