Sydney Casley-Hayford
Financial analyst, Sydney Casley-Hayford, says a massive debt of GH¢11 billion owed banks by players in the energy sector caused a ripple effect in the banking sector that has resulted in the collapse of UT Bank and Capital Bank.
Casley-Hayford reveals that his recent assessment of the banking sector have red flagged outstanding debts owed various banks by the Tema Oil Refinery (TOR), the Volta River Authority (VRA), the Electricity Company of Ghana (ECG) and the Bulk-oil Distribution Companies (BDCs) as severe strains on the banking sector.
“If you add up all their debts, separately you get about 11 billion cedis. This 11 billion cedis is being absorbed by the banking sector. And that is a huge, huge burden for them to pick up,” he said.
The financial analyst was discussing the recent takeover of two acclaimed banks, UT Bank and Capital Bank, by the GCB Bank on current affairs programme, PM Express, on the Joy News channel (MultiTV).
The licences of the two banks were revoked by the central bank because of their poor financial records, caused mainly by non-performing loans.
“The banks who lent those monies to these institutions (TOR, ECG et al.) are now suddenly finding that they can’t collect. And they can’t collect because these institutions are owed by the government. And because the government owes them, they can’t pay,” he adds.
Meanwhile, the current government has issued a 15-year bond to settle all outstanding debts in the energy sector.
The move, according to Vice President, Mahamudu Bawumia, will improve the financial strength of the State Owned Enterprises (SoEs) in the energy sector and make them competitive.
Institutional failure
Mr Casley-Hayford, however, said the myriad of other factors that led to the collapse of the two banks and current irregularities in the banking sector – such as very high-interest rates and non-adherence to regulations – is the result of institutional failure.
For instance, he blames the local bourse for not keeping UT Bank in check, even though the bank had been listed on the Stock Exchange.
“As far as I know UT Bank had not filed its financial statement since 2015…the stock exchange should have put pressure on UT Bank to come forward and give a reason why and if it didn’t get a satisfactory reason, then it could have de-listed the bank ages ago,” he said.
Poor government
He also put part of the blame on the previous government, led by John Mahama, for failing to act even though signs of serious problems had been identified during its tenure.
According to him, because countless reports had revealed an unstable state of the banking sector, and at the two banks in particular, he suspects that poor discretion caused the previous administration from averting the current problem.
“The previous government should have cleaned it out once and for all. But I think out of political expediency they didn’t so we are now facing the brunt of it. But if this government didn’t do it, somebody has to come and do it because you can’t carry on with this kind of level of debt”, he said.
He wants the current administration to quickly implement the National ID system, improve the addressing system to facilitate banks’ ability to track down customers who may attempt to defraud banks through loans.
-Myjoyonline