Dr Addison in an interview with Daily Graphic said he was content that the banking sector reforms that reduced the number of banks from 33 to 23 had made the banking sector more resilient to shocks.
Bank of Ghana hasn’t received new banking applications yet
The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said that the central bank had not received any fresh applications for new banking licences in the last few months.
The Governor of the Bank of Ghana (BoG), Dr Ernest Addison
He expressed optimism that the few banks that currently operated in the country remained “well-capitalised, solvent, liquid, efficient and profitable, with improved financial soundness indicators.”
There have been concerns that the BoG was processing fresh applications for banking licences two years after the financial sector clean-up.
But Dr Addison said: “We have a framework that we are working with. It is an open and liberal financial sector and if you meet the minimum capital of GH¢400 million, we will license you.”
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‘The fewer the merrier’
At a Monetary Policy Committee news conference last Friday, Dr Addison, said the financial sector was strong and liquid, even with just 23 banks, suggesting that “the fewer, the merrier”.
“At the start of the reforms in August 2017, total assets were GH¢89.1 billion for a sector that had [36] banks, and two years after the reform process started, total assets had increased to GH¢115.2 billion as of the end of August 2019, even with 23 banks.”
“In the same direction, total deposits have improved from GH¢55.7 billion to GH¢76.0 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,” he added.
Dr Addison said there had been a marked improvement in banks’ performance, which reflected a positive impact of the recent reforms.
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“Banks are beginning to focus on their core mandate of financial intermediation based on the strong capital base after recapitalisation,” he said.
He said the asset quality had improved, with a decline in the non-performing loans (NPL) ratio from 21.3% in August 2018 to 17.8% in August 2019.
“The NPL ratio is trending in the right direction and is expected to be sustained by continued implementation of the NPL write-off policy, intensified loan recovery efforts and stronger credit risk management practices,” he added.
Banking crisis over
The Governor insisted that the cleaning up of the financial sector was over.
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“All the problem institutions in the sector have been taken out and we think that should end the exercise,” he said.
On the issue of rural banks, he said that would be dealt with by the Apex Bank, with support from the BoG.
“We will deal with the Apex Bank to see how best to deal with some of the problem institutions in that sector,” he said.
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