The banking industry restructuring’s unanswered questions

Last week, the Bank of Ghana presented the results of nearly one and a half years of brave and determined banking industry reforms and restructuring. To be sure, despite the many criticisms, which range from genuine, through uninformed, to simply petty, we commend the central bank for taking action aimed at resolving problems which had been left to fester for far too long and which had ultimately presented a threat to the entire financial intermediation framework.

However, we have to point out that the picture painted by the BoG last week at its press conference is overly simplistic and indeed leaves many questions unanswered. Already, this is generating new criticisms and controversies which the restructured banking industry could do without at a time that it is confidence that is needed rather than controversy.

Most of the questions arising relate to the composition and activities of the newly created Ghana Amalgamated Trust, made up of a consortium of yet un-named private pension funds.

Indeed, the first question that deserves to be answered is who the members of GAT are. Private pension funds belong to workers who expect to rely on their contributions when they retire and surely they deserve to know what their contributions are being invested in.

Next is the question of who will make the investment decisions on behalf of GAT. Private pension scheme members have chosen their respective schemes in part on the basis of the credentials of their scheme’s investment managers and if this changes in any way – as is the case with the creation of GAT and its consortium investment portfolios in the banking sector – they certainly have a right to know.

Related to this is the issue of the legality of the substantial investments being made by private pension funds in unlisted companies; only Agricultural Development Bank is listed on the Ghana Stock Exchange among all the beneficiary banks. The constraints put on the investment portfolios of pension funds is for good reason.

Finally, the banking public deserves to know the status of the beneficiary banks too; both with regards to how much they are getting and when and also with regards to the quantitative analyses of their solvency in the run up to the new initiative, which has made them deserving of the intervention. Without this, both government and the BoG leave themselves open at least to accusations of bias and unfairness and possibly to accusations of putting private pension funds at risk.

The banking public also needs to be given more information as to the state of the three mergers being consummated. So far, all the public has been told is that the participating banks have already merged, which most people know is not actually true; the mergers are being negotiated with the BoG’s approval and look certain to be completed since the participants effectively have no choice, but surely the banking public need proper details so as to make informed decisions on whether to bank with them or not.

To be sure this newspaper is fairly confidence that all will turn out well. However, we have better knowledge and insights than most of the banking public, who right now are still facing deep uncertainties as to the actual situation concerning several banks.

It is the duty of the BoG to put their worries to rest.