IF it takes two to tango, then it surely takes more than one side to commit banking sector breaches that will later cost a nation of over 30 million people some GH¢12 billion to tidy up.
That is why any loud silence on how all persons culpable in this expensive banking sector clean up are also being dealt with should worry you and me.
In a country where only 27 per cent of the populace has access to potable water (according to the local office of International Water and Sanitation Center) and tax revenue is projected at GH¢45.3 billion for 2019, spending GH¢12 billion – a quarter of this year’s tax revenue estimate – to finance a central bank’s reform exercise should not end just in public. It must extend to the courtrooms.
Fortunately, this is not a request for the blood of the officers who superintended over the ‘rot;’ a rot that cost the country 7.7 per cent of its 2019 real gross domestic product (GDP) estimate to clean.
It is a request for a fair and balanced accountability that helps to prevent a repeat and ensures that bank directors and executives are not used as scapegoats but the people who supervised these ‘misbehaviours’ are also held to account.
As explained below, bank directors and executives are one of three groups of people who acted in isolation and/or consent to damage the banking sector so badly that nine ‘problem’ banks had to be pulled out of the system to help save the remaining ones and bolster confidence in a business as sensitive as selling and buying of money.
Consequently, if there are sanctions to be applied against those culpable, as is being done against the bank directors and executives, then it must apply, in equal measure, against officers from the two sides.
Instructively too, reforms do not end until all sides account for their actions and inaction. This business of accountability signals to the public that the system is capable of punishing to avoid a costly repeat.
Accountability through prosecutions and/or sanctions does not only strongly signal to existing and future players that ‘if you mess up, you will be dealt with,’ it also reposes confidence in the system that initiated and oversaw the reforms – the BoG and the other state agencies that supported it with investigations.
When done well, timely and transparently, accountability following reforms cements the grounds from which the reformed sector takes off.
Thus, while reforms are necessary, ensuring that all sides account through prosecutions is more critical.
Why BoG officials
Democracy allows for divergent views, but morality makes facts sacred.
In the case of the challenges that prompted the banking sector reforms, the fact is that three sides, not one, are to blame for the 'mess' that saw more than a third of the previous 36 banks collapse and over 3,500 Ghanaians losing their sources of livelihoods in the process.
These sides – bank owners and their managers, central bankers and BoG as a regulator and the government and its assigns – acted in isolation and/or unison to issue the affected banks licences using fictitious capitals, deplete their stated capitals, thereby making them insolvent, misapply BoG emergency liquidity support and entrench and/gloss over poor corporate governance practices.
In short, whatever offence the BoG accused the now defunct banks of committing (which warranted the withdrawal of their licences), were committed with the knowledge and/blessing of central bank supervisors and the BoG in general.This is how.
As sacred institutions with sensitive responsibilities, central banks the world over have robust laws that allow them to take on-the-spot decisions to help safeguard depositor funds and protect the sanctity of banking.
Ghana is not an exception.
Prior to the coming into force of the Banks and Specialised Deposit-Taking Institutions (BSDI) Act 2016 (Act 930), BoG used the Banking Act 2004 (Act 673) and later the Banking (Amendment Act 2007) (Act 738) to regulate the operations of banks in the country.
Like its successor, Act 673, which was repealed in the dying days of 2016, expectantly granted our central bank unfettered powers and access to the records of regulated institutions, including banks.
Specifically, Section 53 of the Act empowered BoG to request whatever information it deemed necessary within periods that it desired.
This presupposes that the central bank could have gotten daily, weekly and monthly reports on the operations of banks to enable it to carry out its regulatory role effectively. The same applies under Act 930.
Additionally, BoG officers could conduct on-site visits to and audits on the operations of banks as and when they deemed fit. If they lacked the capacity, the Acts give them the right to appoint external auditors. Mind you, the BoG is one of, if not the richest state agencies in the country.
Thus, when this same central bank turns around to accuse banks of lying to obtain licences, operating with capital deficits and undermining corporate governance practices for years, then one wonders if such acts were not consented to by the very officers and institution that supervised the banks.
If not, why will banks lend above their single obligor limit without express authorisation from the BoG and still go unpunished until a clean-up exercise points it out? How were banks with negative capital adequacy ratio (CAR) and dully under 24/7 monitoring be able/allowed to borrow from the interbank market without central bank approval? How about the plenty interconnected lending, misapplication of liquidity support and hiding of the true state of the banks using accounting techniques?
If the account of BoG Governor, Dr Ernest Addison, on why the collapsed banks deserved to be collapsed is to be trusted entirely, then the bank’s own officers should have been the first to be marched to court right after the collapse of UT and Capital banks in August 2017.
Sadly, however, not a single central banker, retired or working, has been dragged to court yet, 17 months since the reforms took its first casualty.
Ironically, however, dozens of bank shareholders, directors and executives are in court answering for regulatory breaches that could have only been committed with BoG’s blessings.
To be fair to Dr Addison and the BoG, the governor has said at various fora that his outfit had restructured the central bank, reassigned some officers and injected fresh blood into the Banking Supervision Department, in particular, as part of measures to avoid another regulatory forbearance – a smarter way of saying the predecessors erred.
These measures, however, necessary, are a fraction of what is required.
Since assuming office in April 2017, Dr Addison has sought to be a source of confidence and a symbol of strong leadership in a sector that he is on record to have said lacked decisive leadership and action prior to him coming in.
That is a self-tickle as well as a burden of proof. Ghanaians, obviously, will not believe it just because Dr Addison said it. They will if some or all those predecessors, whose lack of leadership and decisiveness, and by extension, complacency and complicities, brought us here, are prosecuted, found guilty and sanctioned appropriately.
This is another reason why the BoG should march its culpable own to court too.
With the decisions of the central bank already being the source of a sharply divisive and sometimes tetchy discourse, the BoG needs to show proper proof that the GH¢12 billion spent is for a worthy cause.
Part of that can be achieved when its own are punished to signal that BoG will not condone a costly repeat.
In managing the economy and businesses, we do not have to act like some Ghanaians, who will not find money to treat a relative of preventable diseases but find twice as much of the amount to organise a fanciful funeral for the same deceased person.
This questions our level of prudence and the real intention behind the reforms.