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BoG Governor Reveals IMF Role in UT and Capital Bank License Revocations

7 months ago
in Banking & Finance, Business, Economy, Features, highlights, Home, home-news, latest News
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BoG Governor Reveals IMF Role in UT and Capital Bank License Revocations

Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has revealed that his administration inherited a struggling banking sector that faced pressure from the International Monetary Fund (IMF) to implement strict reforms, including the closure of UT Bank and Capital Bank.

The licenses of both banks were revoked in August 2017, shortly after Dr. Addison assumed office. Speaking at the Governor’s Day Dinner hosted by the Chartered Institute of Bankers, he disclosed that the IMF had mandated certain preconditions, or “prior actions,” before approving financial support for Ghana.

“There are a few requirements which the IMF calls the prior actions. You have to do this, you have to do that; otherwise, they are not even going to organize a board meeting to discuss Ghana and disburse any funds to you,” Dr. Addison stated, emphasizing that the central bank had little choice but to revoke the licenses of the troubled banks to safeguard the financial sector.

Financial Sector Cleanup

The Governor described the closure of the two banks as a pivotal moment, noting that the decision shocked many Ghanaians who were unaccustomed to such drastic regulatory actions.

However, he asserted that these measures were necessary to stabilize and strengthen the financial sector, enabling it to withstand subsequent shocks, including the COVID-19 pandemic and the ongoing Russia-Ukraine conflict.

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“This was one of the prior actions to dissolve UT and Capital Bank. Ghanaians had never seen that in a long period of time. People were shocked when the licences of those two banks were pulled,” he noted.

Governance Failures and Sector Challenges

In his address, Dr. Addison reiterated the role of poor corporate governance in the collapse of UT Bank and Capital Bank. He pointed out that inadequate governance not only heightened risks but also undermined the credibility and performance of financial institutions.

Speaking at a previous breakfast meeting at the Banking College, he stated, “Corporate governance plays an important role in promoting a sound financial system, contributing significantly to improving overall performance not only in profits but in credibility.”

The Governor highlighted that the revocation of the licenses reflected the institutions’ significant capital deficiencies and poor governance practices, which necessitated decisive action to protect depositors and the integrity of Ghana’s banking system.

The 2017 banking sector reforms marked a turning point in Ghana’s financial landscape, leading to the resolution of insolvent institutions and a restructured banking sector. While controversial, the measures have been credited with fostering resilience in the banking industry and building confidence in the financial system.

Tags: BoG GovernorBoG Governor Reveals IMF Role in UT and Capital Bank License RevocationsIMFUT and Capital Bank

Comments 3

  1. Joe says:
    7 months ago

    He did not explain why a clean up that was supposed to cost 9 billion ended up costing 25 billion according to reports.

    Reply
  2. Emmanuel Preston says:
    7 months ago

    Well understood uncle Sam was with the big stick but the two institutions grossly contributed to their under performance. What about GN Bank? Can you come clean about that? Before the new government take over the reigns of power, let’s hear better explanations

    Reply
  3. rafa raja says:
    7 months ago

    Dr. Addison is not being truthful to nationals as UT and Capital were ti be acquired by anothrt bank before it was handed over to him, but hr had something aversive against thriving Ghanaian owned banks hence he opted to shut them down.

    Reply

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