Former Finance Minister Seth Terkper has said steps taken by the Bank of Ghana that led to the collapse of seven banks could have been avoided.
He said the defunct banks could have been saved if a workable strategy put in place had been properly applied.
This strategy he said was designed by the NDC government under Mahama and bequeathed to the NPP. But the plan was ignored, he suggested in an interview on Joy FM’s Super Morning Show Tuesday.
Seven banks have collapsed since the NPP government came into office in January 2017. UT, Capital banks bit the dust in August 2017. They were followed by uniBank, The Beige Bank, Construction, Royal and Sovereign banks in August 2018.
UT and Capital banks were taken over by GCB while the rest was rolled into a newly created bank, Consolidated Bank of Ghana.
The BoG explained although it had pumped monies into banks like UT, Capital and uniBanks, they still struggled to remain viable.
The struggles of these banks have been traced to the failings of the era of President Mahama where Dr. Henry Wampah and Dr. Abdul-Nashiru Issahaku were governors of the central bank while Seth Terkper was Finance minister.
Mahama’s trusted hand, Seth Terkper has dismissed attempts to blame him partly for the failure of these banks. He revealed steps the Mahama government took to avert a similar situation in 2015.
Governments over the years had racked up severe debts in the energy sector, some through subsidizing petroleum and power.
Several banks were in the red because they had lent monies to companies rendering services the government as part of efforts to deal with challenges in the energy sector. A third of the energy sector debts, ¢2.71 billion, was owed to financial institutions alone.
With repayments becoming a problem, the Finance minister introduced new levies through the Energy Sector Levies Act (ESLA) in 2015.
Within a year, the Mahama government raised $300million, some of which it used to provide “immediate liquidity” to banks owed by the Volta River Authority.
The Finance minister also was able to restructure two billion cedis in energy sector debts which involved 11 banks.
“There were no bank failures so maybe people did not take notice”, he told show host Daniel Dadzie.
Apart from raising ¢1.28bn to solve the energy problems that had overexposed banks, government also raised ¢1.06bn to settle arrears owed contractors who also owed banks.
A year later, ESLA gave government ¢1.4bn from energy debt recovery levy and ¢1.3bn from road levy making ¢2.7bn, he claimed. ESLA had become so successful, the Akufo-Addo government extended it for 10 years, the former minister asserted.
The main reason for ESLA was to help the banks, the former Finance minister stressed. If government had extended, it meant it was getting huge funds which could have saved the banks, Seth Terkper indicated.
He calculated that government will collect ¢20bn from the extended ESLA because it brings in an average of ¢2bn annually.
“Why were they not used to address some of these problems”?, he asked. The Akufo-Addo government announced it will issue ¢5.7bn bond to support Consolidated Bank of Ghana which took over some of the assets of five of the collapsed banks.
He said the Mahama government had bequeathed to the Akufo-Addo government an ESLA strategy which could be used to save the banks.
The former minister admitted the problems which some of the defunct banks faced were not just liquidity issues. “Those issues have to be addressed but the question is what do you do to protect the banks?”.
Seth Terkper suggested the other issues faced by the banks cannot be “sufficient reason for not taking action for the entire 2017 when money was sitting there.”
The collapse has led to severe job losses.
Some banks in the US in the past faced similar problems as those in Ghana but governments under Bill Clinton and George Bush took steps to save these banks, he said.