Dr. Ernest Addison, the governor of the Bank of Ghana (BoG), revealed that he took over a difficult banking industry where the International Monetary Fund (IMF) had already suggested stringent reforms, such as canceling UT Bank and Capital Bank’s banking licenses.
In August 2017, the year Dr. Addison took over at the central bank, the two banks’ banking licenses were suspended.
Speaking at the Chartered Institute of Bankers’ Governor’s Day luncheon this year, Dr. Addison stated that the Bank of Ghana had to take drastic actions, such as canceling the banks’ licenses, to safeguard the financial industry.
“There are certain prerequisites that the IMF refers to as the prior steps; if you do not fulfill them, they will not even schedule a board meeting to discuss Ghana and will not give you any money.”
According to him, these demands forced the Bank of Ghana to implement the changes.
This was among the earlier steps to shutting down Capital Bank and UT. It had been a long time since Ghanaians had witnessed it. The removal of those two banks’ licenses surprised the public.
Dr. Addison asserted that the actions done to purify the financial industry made the institutions more resilient to outside shocks related to the COVID-19 pandemic and the conflict in Russia and Ukraine.
Context
In 2017, Dr. Addison attributed the failure of UT and Capital Bank to poor corporate governance.
Dr. Addison stated during a breakfast discussion at the Banking College that sound corporate governance is crucial for enhancing economic performance in addition to reducing risk.
“Corporate governance is crucial in fostering a stable financial system, greatly enhancing overall performance in terms of both earnings and credibility,” he stated.
“The loss of banking licenses of UT and Capital Bank due to major capital shortages, also partly reflected inadequate corporate governance procedures within these institutions,” he stated about the early-year revocation of their licenses.
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