With less than three months for the bank recapitalization exercise to end, the Bank of Ghana, BoG, has been advised to strengthen its supervisory department to prevent the collapse of commercial banks in the future.
In addition, the bank must implement the deposit insurance scheme to protect citizens who have deposited their monies with the commercial banks with a view to make returns on it.
Speaking exclusively to Goldstreet Business in Accra, Chief Executive Officer, CEO, of XdsData, a credit reference bureau, Mr. George Ahiafor said issues leading to the take-over or consolidation of seven banks in the country could have been detected earlier if the audit and supervisory departments of the apex bank were strengthened and made to work.
All financial transactions especially loans contracted from the banks, he advised, should have the signature of the credit reference bureaux that did the vetting, explaining that this will ensure that loans are not granted to undeserving persons but rather to those who need it and can prove their capacity to pay.
He said as the financial services sector is undergoing a radical transformation including the increase in licensing fees. Government must therefore act to protect citizens from losing their savings.
Credit reference bureaux
Another proposal he made is that the BoG must insist on the involvement of the credit reference bureaux in assessing loan seekers.
“Credit reference bureaux should be part of BoG’s audit process; compliance and usage must be taken into consideration and no loan should be granted any individual or corporate entity without proof that a credit bureau has provided a credit assessment report to the bank on behalf of the client. With this done, BoG will not be surprised since it will have a full report on the activities of the commercial bank as every loan issued would have a robust risk assessment which will be available to the central bank,” he explained.
Enforcing the law
On the issue of enforcing the law, Mr Ahiafor said, it is important to ensure that information on all facilities are provided and given to the bureaux so all licensed deposit takers are aware of the exposure information.
He added that there must be due diligence reports on every loan as “banks cannot do without granting loans but with a proper due diligence report, good usage will be made of the borrowed money which is actually peoples’ money. The bank must necessarily lend the money to those who need it.”
Mr. Ahiafor further explained that to prevent further collapse of banks, there must be proper, accurate submission of data and returns on all transactions entered into by the banks; all deposit taking institutions including savings and loans companies must subscribe to using the credit reference bureaux services in granting loans. Failure to do this, he said, will lead to a repetition of the bank failure.
He also decried the current practice whereby foreign banks bring in all expatriate staff, a practice which should only be adopted when there is no comparable Ghanaian with the same skills set.
In all, as he pointed out, there must be a conscious effort on the part of government to protect depositors from unscrupulous bankers.
Most importantly, government must legislate the interest rates as has been done in France whereby there is a fixed ratio between deposit and loans.
He said the ultimate solution to the upheavals in the financial services sector must be the implementation of the Basel III agreement which deals with the calculation of risks which when done, will give a credit reference bureau score which will be needed to calculate risks.
Concluding, he said the software employed by the banks must also be tested by the banking supervision department as suitable for our environment as some of the software do not give the actual figures to draw a definite conclusion.
By Kafui Gale-Zoyiku