Finally, the long-anticipated prosecution of the bank chieftains believed to have engaged in deliberate, malfeasant financial acts that culminated in the revocation of commercial bank licenses for reason of insolvency and false financial reporting has begun. First up are those allegedly involved in the collapse of Capital Bank and expectedly, their counterparts in the other failed banks will follow.
Currently there are 52 cases ready for prosecution of which 50 have already been assigned to specific courts/judges. Another 60 cases have been referred to a special investigative team.
While this portends hope for the ongoing efforts to recover monies siphoned away by bank bosses and their recalcitrant borrowing customers, many of whom are active collaborators in the malfeasance of the former, there is still a long way to go. At the last count only GHc849 million had be recovered by the various receivers of the collapsed banks out of GHc10.1 billion handed over to them for recovery.
The wider the gap between the recovery target and actual recoveries the higher the cost to the Ghanaian tax payer; and this is just the cost of the banking sector clean up. Add on the cost of the similar clean ups in the microfinance and the savings and loans industries and the cost to the state – translate as the taxpayer – is closer to GHc20 billion than GHc10 billion.
This huge cost has been largely masked by the fact that it is being financed by public debt so there are no immediate foregone public expenditures, on development projects in particular, to measure it against. But the recent sharp rise in the public debt is telling – government admits that the faster pace of public debt growth over the past one and a half years compared to the previous 18 months or so is largely due to the cost of the financial sector clean up.
Indeed, it would be even more vividly illustrated if government had included this cost in its fiscal deficits for 2018 and 2019; it has not done so on the premise that these costs are one-off expenditures, even as the bill keeps rising.
Therefore, even as we applaud both the BoG and government itself for the clean-up, we appeal to both institutions to pull out all the stops in their effort to recover as much of the diverted financial intermediation industry assets as possible. This includes the diverted assets of collapsed institutions in the micro-finance and savings and loans industries as well as the banking sector. Between the two non-bank genres of financial intermediaries affected there have been some 400 institutions closed down, and even though the amounts involved are much smaller than with the banks, the principle of equity should mean that the culprits identified get the same treatment from prosecutors as their banking industry counterparts.
To this end, we support suggestions that special courts be established. As long as the rule of law is maintained such special courts would not inhibit due judicial process; but it would speed it up, creating room for all the cases arising to be dispatched with.
In turn that would greatly enhance the asset recovery process and so reduce the cost of the financial sector clean up to tax payers. Which is what they deserve as much as the culprits deserve justice handed down to them.