Dr. Mahamudu Bawumia, the flagbearer of the New Patriotic Party (NPP), has described the near-collapse of Ghana’s banking sector as one of the most challenging periods of his tenure.
In a media engagement on Sunday, August 25, Dr. Bawumia outlined the severity of the crisis and the decisive measures taken by the government to prevent a total collapse.
He stressed that rather than letting the banks fail, the government facilitated mergers with more stable institutions to protect depositors’ funds.
Dr. Bawumia also highlighted the reckless behavior of some banks, including excessive lending and misuse of funds provided by the Bank of Ghana.
“Some of the banks broke all the rules and extended loans way above the single [obligor] limit. They were given, in some cases Ghc1 billion by the Bank of Ghana to help them out of the mess, yet they got deeper into the mess.
Another bank was given capital to save the situation, it was given money from the Bank of Ghana’s Lenders of Last Resort facility and they used that money to go and set up Capital Bank.
Instead of securing the problem that they had, they took the money from the Central Bank and went to set up another bank which also collapsed.
“Some took money and went to invest in private properties. So, it was against this background when the governor came to report and this was one of my nightmares for the last eight years. I couldn’t sleep that night… Most people didn’t understand how close we were to the collapse of the entire banking system; we were this close.
“Because all it could have taken was for a few depositors to go to UT Bank and they will tell you there was no money. What would happen, there would have been a complete run on the banking system in Ghana,” he stated.
