Amidst the many calls for the new government to restore the licenses of banks that collapsed during the 2017 banking sector cleanup, the Ghana Association of Restructuring and Insolvency Advisors (GARIA) believes the calls are misplaced.
President of GARIA, Felix Addo maintains that restoring the licenses for these collapsed banks will not be in the interest of the restored banks including the banking sector in general.
Some victims of the financial sector cleanup exercise such as Dr. Papa Kwesi Nduom, Chairman of Groupe Nduom have been on a campaign to get his GN Bank’s license restored. Other experts in finance and economics such as Dr. John Kwakye and Dr. Richmond Atuahene also maintain the exercise disproportionately affected the local banks.
They are calling on the new government to critically assess the whole exercise and if possible restore the licenses of some of these local banks. But the circumstances leading to the revocation of these licenses, Felix Addo says is not conducive for them to be restored.
He argues that the lifeblood of banking is confidence, trust, good faith, and good perception. Without these, banks cannot survive. In his estimation, these collapsed banks have lost trust, confidence, and good public perception.
The President of GARIA predicts that if collapsed banks are reinstated, there will be an immediate rush by depositors to withdraw their funds, fearing another collapse. Moreover, these banks will struggle since he believes the average reasonable person will not be going back to deposit or do business with this organization for a long time.
“Banks operate on reputation, on trust, and on good faith. That would be the very first challenge for these institutions because for a bank to keep doing business, the investing or depositing public should have faith in its ability and its resilience,” Felix Addo explained in an interview monitored by Accra Street Journal.
He therefore insisted that: “If today these licenses are restored, what the ordinary reasonable person would do, a depositor, is to go into the bank and as quickly as possible, pull out all his deposits in the bank. And trust me, the average reasonable person will not be going back to deposit or do business with this organization for a long time to come.”
The Bank of Ghana justifies that deep-seated structural weaknesses made the cleanup inevitable. The Bank says the affected financial institutions were engaged in poor corporate governance, severe capital and liquidity shortfalls, high levels of non-performing loans, and unethical practices rendering many of them insolvent.
With these reputational damages, the President of GARIA believes it will not be in the best interest of the banks themselves and the financial sector for the licenses to be restored.
Last Updated on April 2, 2025 by samboad
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