Banking sector clean-up: ‘Read before making comments’ – Dr. Bawumia tells Mahama

Speaking at a media engagement on August 25, 2024, Dr. Bawumia highlighted the critical state of the banking sector prior to the reforms, which saved the deposits of 4.6 million bank depositors.

“I don’t understand whether the former president has taken his time to actually understand what happened in the banking sector. Some atrocious things happened and this is why these banks had to be saved. They were not collapsed. They were merged into other banks. And no banking depositor lost one cedi,” Dr. Bawumia stated.

He detailed the mismanagement and rule-breaking by some banks, including extending loans far beyond limits and misusing funds provided by the Bank of Ghana.

Dr. Bawumia emphasized that the situation was so dire that it nearly led to a complete collapse of the banking system.

“Most people didn’t understand how close we were to a collapse of the entire banking system. But we were this close because all it would have taken was for a few depositors to go to UT Bank or UMT and they’d tell you there’s no money. What would happen? There would have been a complete run on the banking system in Ghana,” he explained.

Dr. Bawumia urged former president Mahama to read the receiver’s report and the Bank of Ghana report to better understand the situation before making further comments.

He also pointed out the legal procedures involved in handling bank licenses, expressing surprise that Mahama, having been president, would not be aware of these processes.

“He needs to get an understanding before you make comments and you cannot hand over a bank’s licence to them. This is subject to legal procedure. You have to go to court. You don’t have the power in our constitution to do that and I’m surprised sometimes because he has been president before and he should know these things,” Dr. Bawumia concluded.

What happened?

In 2017, the Ghanaian government, led by the Minister of Finance, Ken Ofori-Atta, initiated a reform of the banking sector.

This overhaul resulted in the number of banks being reduced from 34 to 23. Additionally, 347 microfinance institutions, 15 savings and loans companies, and eight finance houses had their licenses revoked due to various corporate governance issues.

The cost of this intervention by the state, not including interest payments, was estimated at GH¢16.4 billion from 2017 to 2019.

However, the government later reported that the total expenditure on the banking sector clean-up reached approximately GH¢21 billion in 2020.

Several financial institutions that were affected by the license revocations have challenged the government’s decision in court, and these legal proceedings are ongoing.