The Panic Banking Is Worrying

We have witnessed "panic banking" in recent past due to the take-over of some banks by the Bank of Ghana (BOG) because of their insolvency. These banks had appeared in the public eye as doing well and therefore, enjoying huge patronage by customers.

The UT Bank and the Capital Bank were last year liquidated by the Central Bank because of insolvency, and as if that was not enough the UniBank was also added to the list of non-performing banks that have to be rescued to avoid total collapse.

The BOG has placed the bank under the administration of KPMG, a private financial firm of high repute, to resuscitate the bank in the next six months, to avoid total collapse.

This was carried out in line with Section 107 of the Bankers and Specialised Deposit Taking Institutions Act 2016(Act 930) that empowers the central bank to appoint an official administrator for a bank when its capital adequacy ratio (CAR) falls below 50 per cent of the required minimum of 10 per cent.

In cracking the whip, the BOG asserted that UniBank "persistently maintained a capital ratio below zero, currently negative 24 per cent making it technically insolvent."

It added that the bank persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement, relying extensively on liquidity support of more than GH¢2.2billion from the BOG over the past two years to meets its recurrent liabilities.

The Ghanaian Times wonders why the bank officials continued to enjoy good remunerations and created the impression that they were the best performing banks, when the operational results showed a different picture.

We are concerned about the future of banking and the fate of decided not to give the matter much prominence deposition and in order to avoid fear and panic for the clients. Already there is a lot of anxiety following the announcement that a further 273 financial institutions are in distress and we do not know the next bank to be affected.

Although the BoG has assured the security of all deposits, there is a general fear and panic among Ghanaians about the banking sector as clients continue to besiege the branches of the bank, ostensibly to withdraw their savings.

It is unfortunate that banks that should exist to make life comfortable for their clients are rather inflicting psychological pain and distress because of uncertainty of clients' deposits. Customers who have their banks liquidated or declared insolvent have to forgo all other activities, struggle in queues for hours to access their moneys. Some do not get access to their funds during the transition period.

We are worried about the pronouncement of liquidations of banks with its attendant effect on clients and implications for economy as well as the banking sector in particular.

We have observed an upsurge of banks in the country over the past few years, giving the impression that the environment is conducive for business, but what is unfolding before our eyes gives cause to worry.

We urge BoG to be more stringent in its supervision and to ensure that the emerging banks operate within the banking laws and are in good standing in terms of their operational results.

Customers savings and investments deserve to be secured at all times We, therefore, suggest that the BoG should periodically come out with "score cards" rating the banks in term of their efficiency and profitability to guide prospective customers in their banking decisions.

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