Many, if not all were expecting most financial and banking analysts to commend the Bank of Ghana (BoG) following the claim it had completed its clean-up exercise in the banking sector, and indeed this is what has happened.
However, President of Monfant Banks International Consulting (MBIC) Group, Dr. Jerry Kombat Monfant, is representative of a minority who have an alternative technical view of the BoG’s solution – he asserts that the central bank used antiquated and old fashion tools to fight a modern financial crisis.
He unveiled his exposition during a public lecture organised in partnership with Certified and Corporate Consultants, Ghana and Policy Initiative for Economic Development.
“BoG used a typical financial crisis antidote in cleaning the financial sector. When you do this, you cut the economy off”, he reiterates.
Banking crisis can either be a systemic financial crisis or a typical financial crisis notes Dr. Kombat Monfant, asserting that the central bank applied possible solutions to a typical financial crisis to solve a systemic crisis as the latter was exactly Ghana’s financial intermediation industry’s situation prior to the clean up.
According to him, the modern acceptable standards in solving a systemic financial crisis include but are not limited to providing large fiscal stimulus relative to demand, which implies injecting more capital into failing banks and also government could have offered guarantees rather than haircuts to creditors – the latter being a reduction applied to the value of an asset – he stressed.

With regards to capital injection rather than collapsing existing banks, the Deputy BoG Governor, Dr. Maxwel Opoku-Afari recently reiterated that the central bank revoked licenses of insolvent banks because they were operating fraudulently, meaning, banks took depositors money and gave it to related party institutions without adhering to the laid down rules and that there was no way the BoG could have injected liquidity into fraudulent banks. This was during the 2019 Ghana Industrial Summit and Exhibition (GISE) summit held in Accra last month.
In August 2019, the BoG indicated that it has completed the clean-up exercise of banking and Specialized Deposit-Taking (SDT), and non-banking financial institutions (NBFI) sectors. However, Mr. Kombat Monfant raises doubt about this, quoting the proverbial Chinese saying that “the water will find its way through the stones in to the river”.
By this he meant that there is no way the BoG could have declared victory in the clean-up owing to the fact that once the central bank concentrated only on traditional banks while it does not have the regulatory mandate and power to regulate activities in other financial sectors such as fund management, security and brokerage firms, insurance companies and pension fund companies, “when you finish, the other side will be hit”.
“Don’t forget the shadow banks provide liquidity support to the main stream banks and the Non Banking Financial Institutions like the savings and loans companies and the Finance leasing companies. Once you liquidate the banks you disrupt those institutions and also shift the financial burden on them”, Dr. Kombat Monfant says.
This implies that the traditional banks will be stronger, but the rest of the institutions in the entire financial sector will remain weak.
While some analysts may not agree with his exposition few can disagree with his conclusion as even now, the regulators of the capital market, the insurance industry and the privately managed pensions industry are struggling to cope with insolvency among the companies under their respective regulatory purviews, resulting directly from the meltdown the BoG has instituted in the financial intermediation industry.
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