Government defends liquidation of banks

Accra (Greater Accra), 28^th January 2000

The Minority group in Parliament on Thursday condemned the liquidation of the Bank for Housing and Construction (BHC) and the Co-operative Bank, saying the government could have taken other options.

They mentioned the " management, worker buy-out" in the case of BHC and " sell off" to other banks as some of the options.

The government spokesmen, however, responded that it has taken the two financial bodies through what it takes to make a bank viable and that "enough is enough"

Mr. Albert Kan Dapaah, NPP-Afigya-Sekyere, who led the opposition debate took the government to task for not informing the public enough on the conditions and reasons for the liquidation.

He said the inexplicable liquidation of the two banks "will further, dampen the enthusiasm of the average Ghanaian to save.

"Because of previous bitter experiences, many Ghanaians have not developed the habit of regular savings to support the government's desire for a saving rate equivalent to a minimum of 20 per cent of Gross Development Product (GDP) as required by its own economic strategy."

Mr. Moses Asaga, a Deputy Minister of Finance, said since 1992, the government had intervened on several occasions to save the two banks from collapse by injecting capital into them "even when they messed up".

He said the bad managerial practices that went on in the banks had eaten their resources up to a point "where there is no need to intervene".

"While the Co-operative Bank had a capital ratio of over negative 300 per cent at 29 December 1999, the BHC could manage only five per cent at the same period."

He said "the banks net worth was in the area of negative 40 billion cedis, and if it takes one only 10 billion cedis to start a new bank, who would risk?"

Mr. Asaga said very soon, four new banks would join the financial sector and some of the skilled workers of the liquidated banks would be taken on board.

He revisited the A-Life scandal, which, he said, happened because of pure dishonesty on the part of the BHC management.

Mr. Osafo Maafo had questioned the supervisory role of the Bank of Ghana in the clearing system.

He said from his personal experience as a banker, "no over-withdrawal can be made without the knowledge of the central bank because they can easily cross-check when in doubt".

Mr. Asaga said when top management personnel, who is an interested party in a dubious deal is supposed to answer queries from the Bank of Ghana, "he will definitely defend a bad transaction".

He allayed the fears of the minority on a possible loss of money from the consolidated fund as a result of government interim intervention to save depositors.

Mr. John Mahama, Minister of Communications, asked members to compare the problems that depositors of the defunct BCCI went through to the present situation for their personal judgement.

He said the government's action of ensuring that all depositors "get 100 per cent of the credit has saved them from getting the normal raw deal from liquidators".

He dismissed the Minority claims that the liquidation had something to do with "conditionalities of the World Bank and the International Monetary Fund (IMF) saying the action was taken to instil financial discipline in the system and to protect the ordinary man.

GRi