Debt Restructuring: Banks aiming to preserve solvency, liquidity says Alhassan Andani
Former President of the Ghana Association of Bankers (GAB), Alhassan Andani, has said banks in the country amid the prevailing economic challenges and imminent domestic debt restructuring by government are trying to preserve solvency and liquidity.
According to the astute banker, that is the number one priority of banks in the country.
Speaking on the PM Express Business Edition monitored by norvanreports, Mr Andani said, “The impact of the economic challenges has hot household credit and their ability to even do basic savings, and the bank’s have to deal with all these.
“But number one on the priority list of banks is to preserve solvency and liquidity risks. Banks are looking to ensure preservation of liquidity, to ensure that their primary commitments to depositors are met when people sense the threat that they may lose their monies one way or the other.
“And also, liquidity already given out by banks as loans to households, businesses and even government is being threatened because the earning ability of households, businesses and government to pay back loans and interest is challenged.
“So really, what banks are doing now is to preserve solvency and liquidity, because their first duty is to be able to pay depositors when they come for their money.”
Mr Andani’s assertion is on the back of an imminent domestic debt restructuring programme to be undertaken by government as part of securing a $3bn IMF deal.
Most likely to be affected by the domestic debt restructuring are banks in the country, given their high exposure to government debts.
Analysts have said that the domestic debt restructuring will adversely impact the Capital Adequacy Ratio of banks which might also threaten their solvency.
Also exposed to risks from the debt restructuring by government, are pension funds, insurance companies and other institutional investors.
Already, the Finance Minister, Ken Ofori-Atta has announced plans to constitute a 5-Member Committee consisting of prominent financial services professionals to lead extensive stakeholder engagements across all the key segments of the financial sector – banking, asset, management, pensions, and insurance – as part of moves to protect the financial system in the debt restructuring programme.
The announcement of the Committee Members is expected to be made in the coming days.
