THE FORMER Head of the Economics Department of the University of Ghana, Prof. Peter Quartey, has described the government’s decision to support a private arrangement to invest in five banks as a timely intervention that will help protect jobs and retain indigenous ownership in the banking sector.
He told the GRAPHIC BUSINESS that the arrangement would also help inject efficiency into the banks through the planned restructuring of their operations under the Ghana Amalgamated Trust Limited (GAT) support.
The GAT, a special purpose vehicle (SPV), was established in December to pool resources from private investors, including pension funds, and invest in five well governed but undercapitalised banks.
The beneficiary banks are the state-owned ADB Bank and National Investment Bank (NIB), Universal Merchant Bank (UMB), Prudential Bank and OmniBank, which is merging with Sahel Sahara Bank into the yet-to-be unveiled Omni-BSIC Bank.
Of the 23 banks currently in operation (inclusive of the five being supported), nine banks, representing 39 per cent are Ghanaian-owned.
Impact on jobs
Speaking on the last-minute arrangement which helped to save five banks from losing their licences, Prof. Quartey said to properly appreciate the impact of the GAT arrangement, one needed to know what could have happened if they were allowed to go down.
“From what we are told, these are banks that are well run, have good corporate governance structures and are profitable except that they have not been able to raise the needed capital.
“Would you allow them to go down for people to lose employment,” he asked.
“If these banks should go down, I think the repercussions on unemployment and people’s livelihood is going to be bad. So, for me, the intervention is timely and it needs to be sustained,” he said.
In 2017 and 2018 when seven banks were collapsed for various breaches, some 3,500 people lost their jobs.
On concerns that the government was gambling with workers’ pensions through the GAT arrangement, Prof. Quartey said such allegations were not well grounded.
He said the impact on jobs, indigenous ownership in the banking sector and promised return on investment were enough assurances that the arrangement would deliver prudence.
He said although the tier one pension manager, the Social Security and National Insurance Trust (SSNIT), might have made some unproductive investments in the past, he did not foresee the GAT arrangement turning out as same.
“These are banks that have been well managed and so I do not think that it is money being thrown away,” he said.
Value for money
Prof. Quarter, however, emphasised that the managers of GAT should prioritise prudence to ensure that the pension funds recoup the funds that they are investing in the banks.
To achieve this, he said the Bank of Ghana should strictly monitor the operations of the funds to ensure that they did not deviate from their core business.
Also, he said “the GAT should also request regular reports to ensure the judicious use of the funds.
“Once that is done, we will ensure that we get value for money,” he said.
Earlier, the transaction advisor of GAT and Managing Director of Algebra Securities, Mr Kofi Osafo Sampong, told the Daily Graphic that the GAT team would hold the banks to account through a rigorous process that would deliver value to investors.
He said as seasoned investment bankers, the team would ensure that the various inefficiencies that had limited the optimal productivity in indigenous banks were pruned off and the banks placed on a straitjacket that would allow them to do what they were supposed to do.
In line with this, he said GAT, through the arrangement had been given the power to appoint a consultant who would restructure the operations of the banks, veto decisions at the board level and place restrictions on key activities, including payment of bonuses, executive compensation and dividends.