Financial analyst blames collapse of local banks on panic withdrawals
Financial analyst, Yaw Yirenkyi, has stated that no local or foreign bank can survive if one third of its customers are to withdraw their funds at the same time.
He said it does not matter whether the bank is multinational or not, it just cannot survive if it happens that one third of its customers move their funds from that bank simultaneously.
Mr Yirenkyi in an interview gave his reaction to the court action taken against the Chief Executive Officer of the defunct Beige Bank, Mr Michael Nyinaku following the collapse of some nine domestic banks during the recapitalization exercise by the Central Bank in August 2017.
The nine banks that collapsed during the cleanup exercise in the financial sector by the Bank of Ghana are UT, Capital, Beige Bank, The Construction Bank, Sovereign Bank, Unibank; The Royal bank; Heritage Bank and Premium Bank.
Mr Nyinaku was granted a GHS 200 million bail by the court on Tuesday November 8, after being slapped with 43 charges of theft and money.
Financial Analyst, Mr Yirenkyi intimated that panic withdrawals resulted in the inability of the collapsed local banks to meet the new capital requirement set by the central bank.
“Panic withdrawals following the announcement that banks that couldn’t meet the new minimum capital requirement weakened some of the domestic banks. That played a part in their inability to meet the new capital requirement leading to their collapse,” he said.
“Let me place it on record that no bank, it doesn’t matter whether it is locally or foreign owned, can survive if just one third of its customers withdraw all their deposits at the same time. Not all the customers, just one third and that bank will collapse.”
He also added that there was no way the local banks were going to merge with the foreign-owned banks in meeting the requirement.
“Asking all the banks to raise the same capital requirement was detrimental to the local banks,” he stressed.
