ghananlpcommunity/ghana-gov-speeches-sentences huggingface dataset:
Now let me shift my remarks to the corrective measures that were put into place in 2022 to manage the crisis, in particular the major policy effort designed to put Ghana’s debt on a sustainable path.
These corrective actions included the Domestic Debt Exchange (DDE) program, where the stock of Government of Ghana/public sector debt was to be halved from 105 per cent of GDP to 55 per cent of GDP by 2028.
The holders of Government debt had their debt instruments exchanged for new ones with lower coupon payments and longer tenors.
Despite the resulting losses incurred by households, banks and other financial institutions, the threshold of 55 per cent of GDP was not met.
As part of the solution, the Minister for Finance wrote to the Bank of Ghana with a proposed treatment of 50 per cent haircut on Bank of Ghana’s holdings of Government’s non-marketable debt.
Naturally, the Bank of Ghana was concerned and fully aware of the implications of such a treatment on the books of the Bank.
We held several discussions with the Ministry of Finance, the Governments Advisors on the Debt Exchange (Lazard & others) and the IMF on this treatment.
At the request of the Bank of Ghana, the IMF sent a technical mission of central bank balance sheet experts to assist the Bank of Ghana to assess how the debt treatment would impact the Bank’s financial position and its ability to carry out its statutory mandate.
The conclusion of that technical assessment mission was that Bank of Ghana should be able to function effectively (i.e., remain policy solvent) even after the imposition of such a haircut.
The IMF placed a high premium on this particular debt scenario involving the Bank of Ghana as that was the only scenario that was going to allow the Government to meet the debt threshold that would allow Ghana’s IMF programme to proceed for Board approval.
The Bank of Ghana accepted this proposal on that basis, given how crucial it was to secure the Fund-supported program and the benefits that would inure to the economy as it would help to reset the economy and prevent a total collapse with much broader socio-economic implications.
A Bank of Ghana board meeting was therefore arranged to get the board pass a resolution to this effect.
The Bank of Ghana acted in good faith for the broader interest of Ghana’s economy.
The debt included all the legacy debts of the Government of Ghana dating back to 1992 and included the accrued overdraft of 2022, overdraft to Cocobod, the Covid-19 Bond, and even BoG holdings of Telecom Malaysia (Ghana Telecom Bonds) Bonds and Tema Oil Refinery (TOR) bonds issued by Government.
As of 2015, the accumulated claims on Government and Cocobod were about GHC13 billion.
The debt, therefore, is not about recent debt alone.
Almost all lending from the IMF, including the Extended Credit Facility and the Rapid Credit Facility during the Covid-19 pandemic, and all financial sector resolution bonds have all been added as Bank of Ghana lending to government.
This is not factual.
It is important to state that the losses reported were technical losses arising from the haircut and the application of accounting standards (in particular, IFRS 9) to estimate expected credit losses over the tenor of the Government debt held by the Bank of Ghana.
It is not money lost by the Bank of Ghana through its operations in 2022.
Rather, one should look at this as a reflection of the total cost of the economic and social crisis the country faced over the years and an attempt to resolve a major structural problem of the Ghanaian economy.
I must also add that, if one takes time to go through the historical financial statements of the Bank of Ghana, one will realize that this is not the first time that the Bank has gone into negative equity.
During the early years of structural adjustment, very large exchange rate depreciations led to revaluation losses that drove the Bank into negative Equity.
Indeed, anytime the economy faces major challenges, the Bank of Ghana balance sheet suffers, and the equity position moves into negative territories.
You will recall that in 2017 and 2018, the Bank of Ghana incurred similar negative equity from the impairment of legacy liquidity support loans granted in 2015 and 2016 to insolvent banks, which our external auditors impaired due to the doubtful prospects of recovering from those insolvent banks.
The Bank of Ghana, however, recovered and generated profits throughout the period 2019 to 2021.
It is worth noting that Central Banks are not commercial banks.
Bank of Ghana’s current financial condition will not impact negatively the operations of the Bank.
The IMF Technical Assistance mission validated this conclusion before the necessary decisions were taken.
In their opinion, the Bank of Ghana was policy solvent and would remain so, as it had enough income to cover monetary policy operational costs.
The Bank of Ghana had sufficient capital amounting to about 15 per cent of its total liabilities.
Its recommendation was for the Bank to retain all profits and a reassessment should be made in the year 2027.
The Bank will also manage to reduce its operational costs during this period.
Ladies and Gentlemen, in all these, the Bank of Ghana has acted within the applicable laws.
It is not true that Bank of Ghana has been providing financing for the Government every year.
There has been zero financing in 2017, 2018, 2019 and 2021.
The Bank of Ghana has only had to support in the pandemic year of 2020 and the crisis year of 2022.
The Bank of Ghana Act (612), as amended, limits financing of Government to 5 per cent of previous year’s tax revenue.
This provision in the law has been adhered to since I took office in April 2017.
Between 2017 and 2019, in addition to the requirements of the Bank of Ghana Act (612), as amended, the Bank signed a Memorandum of Understanding (MOU) with the Ministry of Finance to even impose a tighter restriction of zero central bank financing, and this was observed strictly, even though MOUs are not legally binding.
Between 2012 and 2015, the Bank of Ghana provided overdrafts to finance government and Cocobod every year.
And there was neither a pandemic nor a global economic crisis.
When Ghana was hit with Covid-19 in 2020, Section 30(6) of the Bank of Ghana Act (612), as amended, was triggered, and as indicated earlier, the Bank purchased GHC10 billion worth of Covid-19 bonds to support the economy through the pandemic.
This was done within the applicable laws governing the Bank of Ghana.
When section 30 (6) of the Bank of Ghana Act (612), as amended, is triggered, it, allows the Governor, the Minister for Finance and the Controller and Accountant General to agree on a new limit of central bank financing.
The law further says that the Minister of Finance will then have to inform parliament and the Minister has since informed parliament as part of his briefing to update Parliament on the IMF program and status of the Domestic Debt Exchange.
Let me also seize this opportunity to talk about an issue that has come up lately in the media and one which borders on our new Head Office building.
While discussions on a national security issue like the Central Bank building is a sensitive one, I will provide you with a brief history of how this has evolved over the years.
The Bank of Ghana as far back as the 1990s began the search for suitable and secured land for a new Head office.
In 2012, the Bank was allocated an unnumbered 5.19-acre land at Accra Central by the Lands Commission which also had issues.
The Bank did not have access to the land since the Ministry of Foreign Affairs and Regional Integration refused to give the Bank vacant possession on the grounds that they had never agreed to give up ownership of the land.
The Bank continued to search for suitable land for its Head Office throughout the period from 2013 to 2016.
More recently in 2018, the Bank approached the SIC to acquire its vacant land at Ridge near the Ridge Hospital.
The Government issued an Executive Instrument to allow the Bank of Ghana acquire that Land and SIC was duly compensated.
The Bank then began to plan the building of its new Head Office, taking into consideration the need to ensure the building meets all the requirements of a modern central bank of international standards (similar to central bank head office buildings in Abuja and Dakar), and includes provision for data centres, currency processes, vaults, and other sensitive installation.
It is not just a simple ordinary building.
Let me re-emphasise that the Bank followed all the necessary public procurement processes in this endeavour.
No procurement laws were broken.
I have requested that a more detailed response to the issues raised in the public discourse on the Bank’s new Head Office building be published on our website immediately after this press engagement today.
The decision to commence construction was taken in 2019 when the Bank generated profits.
Appropriations for the Head Office were made each year from profits in 2019, 2020, and 2021.
The project has, therefore, been going on for over 3 years.
The DDEP only took place in January 2023.
If we were to be taking the decision today, building a legacy Head Office would not have been a priority.
However, this is a project that has been running for 3 years and is about 50 per cent complete.
The Bank is fully aware of its responsibilities to ensure that the costs do not escalate beyond reasonable levels and that many of the original design features including data centre, currency processing centre, ICT equipment, and specialised security features have been deferred and only grey boxes provided for future use to manage costs.
Let me end by reassuring the public on the policy solvency of the Bank of Ghana to achieve its statutory mandate going forward.
Every central bank’s credibility depends on its ability to achieve its mandate.
These technical losses do not jeopardize that ability and are sometimes the price to pay for achieving those aims.
It is important that we place the central bank’s policy mandate ahead of profits.
We must recognize the special character of Central Banks and the role they play in an economy.
Central Banks are institutions of public policy and do not exist for profits but for national welfare and as such could have a negative equity position and continue to be policy effective.
Very clear policies have been put in place to return to positive equity in the medium term.
And as we do this, we will continue to rebuild our policy buffers to continue to provide the necessary assurance of policy support as we rebuild a stronger and more resilient and inclusive economic post-pandemic.
Thank you very much for your kind attention
Let me thank you and your team from the IMF, who have spent the last two weeks with us pouring over numbers and discussing matters to move our economy forward.
We are happy that this effort has not been in vain and we are ending the Mission with a Staff-Level Agreement, which we hope will translate into a Management and Executive Board approval for the release of another tranche of IMF support.
We have shown steadfast commitment to a set of policies right from the beginning under very difficult circumstances and we have reached a stage where programme implementation is progressing well.
The exchange rate remained relatively stable throughout last year, supported by tighter monetary policy and stronger foreign exchange reserves.
During the first quarter of this year, this progress has continued although we have witnessed some slowdown in the pace of disinflation primarily due to a variety of factors including adverse base drift effects.
During the period while the mission was here, we have also addressed some burning issues including the impact of the DDEP on the balance sheet of the Bank of Ghana and we have reached broad understanding on early recapitalization of the Bank of Ghana and a Memorandum of Understanding between the Bank of Ghana and the Ministry of Finance will be signed to this effect.
To conclude, in Ghana’s recent history, we have not been able to successfully implement an IMF-supported programme in an election year without derailment.
We recognize the importance of continued macroeconomic stability and an early return to the capital markets, and we will remain committed to ensure that programme implementation stays firm.
Ladies and Gentlemen, when the current Management of the Bank of Ghana took office in early 2017, the banking sector was faced with many challenges.
We inherited a financial system which was under a considerable state of distress, with banks that were not meeting the capital adequacy requirement and others whose capital was eroded with high non-performing loans.
Some of these banks were insolvent and illiquid, others were solvent but illiquid.
This state of affairs was largely a result of poor corporate governance, false financial reporting, and insider dealings.
The Bank of Ghana had in the past continued to provide liquidity support to these failing banks, without addressing the underlying problems that led to the illiquidity and insolvency of these institutions.
In short, the financial system had reached a tipping point and we could not have assumed business as usual.
The Bank of Ghana, therefore, embarked on a comprehensive reform agenda, with the objective of cleaning up the sector and strengthening the regulatory and supervisory framework for a more resilient banking sector.
As part of this reform exercise, the banking licences of seven (7) insolvent banks were revoked over the last sixteen months.
Steps were taken to ensure that they exited the market in an orderly manner.
Furthermore, the Bank of Ghana on 11 th September 2017 issued the Minimum Capital Directive (BG/GOV/SEC/2017/19) by which all universal banks were required to increase their minimum paid-up capital to GHC400 million by 31 st December 2018.
Banks were required to comply with the new minimum paid-up capital requirement through (i) a fresh capital injection; (ii) capitalisation of income surplus; or (iii) a combination of fresh capital injection and capitalisation of income surplus.
The Minimum Capital Directive was part of regulatory measures aimed at strengthening and making the banking sector more resilient to shocks as well as to help reposition the banks to better support the growing needs of the Ghanaian economy.
It was also the expectation of the Bank of Ghana that the recapitalisation exercise would help promote consolidation in the banking industry through sustainable mergers and acquisitions along with stronger corporate governance structures and risk management systems and practices.
UPDATE ON RECAPITALISATION EXERCISE Following the recapitalisation exercise that ended at the close of business on 31 st December 2018, there are now 23 universal banks operating in Ghana.
These banks have all met the new minimum paid-up capital of GHC400 million.
A schedule of banks and how they have met the new requirement is attached as Annexure 1.
In particular: - Sixteen banks have met the new minimum paid-up capital requirement of GH¢400 million mainly through capitalisation of income surplus and fresh capital injection.
- The Bank of Ghana has approved three applications for mergers.
Consequently, First Atlantic Merchant Bank Limited and Energy Commercial Bank have merged, Omni Bank and Bank Sahel Sahara have merged, and First National Bank and GHL Bank have merged.
The three resulting banks out of these mergers have all met the new minimum capital requirement.
- Some private pension funds in Ghana have injected fresh equity capital in five indigenous banks through a special purpose holding company named Ghana Amalgamated Trust Limited (GAT) .
In addition to the state-owned banks (ADB, NIB) benefiting from the GAT scheme, the other beneficiary banks ( the merged Omni/Bank Sahel Sahara , Universal Merchant Bank, and Prudential Bank) were selected by GAT on the basis of their solvent status and good corporate governance.
More details about the GAT scheme will be provided by GAT and the Ministry of Finance.
To ensure that the capital provided by banks indeed represents quality capital in the amounts required to meet the Minimum Capital Directive, the Bank of Ghana adopted and implemented a rigorous capital verification process.
In the process, the Bank of Ghana has undertaken comprehensive due diligence on new investors in banks and has verified the sources of funds for the recapitalisation.
The verification process is still on-going and will be validated by external auditors of banks as part of the 2018 external audit.
RECAPITALISATION AND RESTRUCTURING OF STATE-OWNED BANKS Resources from GAT will be used to recapitalize the two state-owned banks (ADB and NIB) to help drive and promote long-term sustainable financing for agricultural and industrial expansion.
The Government has notified the Bank of Ghana that it intends to restructure NIB through governance and management reforms as well as streamlining its business model to help refocus it as a bank to industrialisation.
To help ensure that these reforms succeed, the Bank of Ghana has today appointed an advisor for NIB, p ursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of the bank with a view to helping improve the affairs of the bank.
The Advisor will hold office until otherwise advised by the Bank of Ghana and will furnish the Bank of Ghana with a status report on the bank in three months and as frequently as the Bank of Ghana may require.
GN BANK OBTAINS A SAVINGS AND LOANS LICENCE GN Bank (GN) was unable to comply with the Minimum Capital Directive by 31 st December 2018.
Consequently, GN Bank has applied for, and the Bank of Ghana has approved the grant of a savings and loans company licence.
The Bank of Ghana has also approved a transition plan submitted by GN for winding down aspects of its business which are not compatible with a savings and loans company licence.
The Bank of Ghana will closely monitor implementation of the approved transitional plan which is expected to be completed by the end of June 2019.
In this regard, the Bank of Ghana has appointed an advisor for GN pursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of GN with a view to ensuring a smooth transition to a viable savings and loans company.
The Advisor will hold office until otherwise advised by the Bank of Ghana and will furnish the Bank of Ghana with a status report on the GN in three months and as frequently as the Bank of Ghana may require.
VOLUNTARY WINDING-UP OF BANK OF BARODA (GHANA) LIMITED The Bank of Baroda (Ghana) Limited was licensed by the Bank of Ghana as a universal bank on 28 th January 2008.
It is a wholly-owned subsidiary of Bank of Baroda India which is in turn wholly-owned by the Government of India.
By a letter dated 9 th April 2018, the Bank of Ghana was notified by the Bank of Baroda, India (the parent company of Bank of Baroda (Ghana) Limited) of its decision to divest/sell its entire 100% equity in the bank due to the Government of India’s decision to rationalise the overseas operations of the branches/subsidiaries of Indian public sector banks.
The Bank of Ghana has since approved a request for a voluntary winding up of the operations of Bank of Baroda (Ghana) Limited effective December 31, 2018.
To ensure an orderly exit, and to safeguard the interest of depositors and customers, the Bank of Ghana has approved an Assumption Agreement between Bank of Baroda (Ghana) Limited and Stanbic Bank Ghana Limited under which the latter will assume all deposits and selected loan assets of the bank.
The Bank of Ghana will closely monitor the transition and is confident that Stanbic Bank Ghana Limited will ensure that depositors of Bank of Baroda (Ghana) Limited continue to have access to their deposits.
RESOLUTION OF PREMIUM BANK LIMITED AND HERITAGE BANK LIMITED Pursuant to Section 123 of the Banks and Specialised-Deposit-Taking Institutions Act, 2016 (Act 930), the Bank of Ghana has revoked the banking licences of Premium Bank Limited and Heritage Bank Limited with effect from the date of this Notice and has appointed Mr.
Vish Ashiagbor of PricewaterhouseCoopers as Receiver for the two banks.
Complete details of the bases on which the licences of the two banks have been revoked are attached as Annexures 2 and 3.
Among other things: - Premium Bank was found to be insolvent as of 30 th November 2018 with a capital adequacy ratio of negative 125.26%; - Heritage Bank among other things obtained its banking licence on 4 th October 2016 on the basis of capital with questionable sources.
Furthermore, the bank was unable to meet the new minimum capital requirement of GHC 400 million as of 31 st December 2018.
The Bank of Ghana has also approved a Purchase and Assumption Agreement between the Receiver and Consolidated Bank Ghana Limited (CBG) under which the Receiver has transferred some assets and liabilities of the two banks to CBG.
All deposits (current, savings and fixed deposit accounts) of the two banks have been transferred to CBG with effect from the date of this notice.
The Government of Ghana has issued a bond in the face of GHC 1.403 billion to CBG to cover the gap between the value of the good assets and liabilities of the two banks transferred to CBG.
All deposits of the two banks are safe and customers will continue to have full access to their funds.
CONCLUSION Ladies and gentlemen, it has been an eventful last twenty months during which the Bank of Ghana has had to take tough but necessary bold steps to clean up the banking sector and to reposition it to support the economic growth and transformation agenda for Ghana.
The just-ended recapitalisation exercise has repositioned the banking sector as better capitalised, liquid, stronger, and more resilient.
The on-going strengthening of the regulatory and supervisory framework will also ensure that the sector is well-governed, well-managed, and better supervised to restore and maintain much-needed confidence in the sector.
In particular, the Bank of Ghana expects that: - Shareholders of banks will exercise control over these institutions not for the benefit of shareholders and related and connected parties, but primarily in the interest of depositors, creditors, employees, and other stakeholders; - Bank Boards will be composed of persons that are capable of exercising strong and independent oversight.
They are expected to ensure that the interests of all relevant stakeholders are protected; - Risk management will be integrated in the strategic focus of the governance and management of these institutions; - Compliance with regulatory requirements and ethical standards are embedded in overall risk management; - Bank of Ghana’s supervisory systems, processes, and teams are better able to identify early warning signs, enforce regulatory requirements and ensure that prompt corrective action is taken by banks to recover quickly from any signs of distress.
Bank of Ghana remains committed to promoting a safe, sound, stable, and resilient financial sector, and counts on the cooperation of all stakeholders.
Ladies and Gentlemen of the Press, I have had to call you this morning for the singular purpose of responding to the news doing the rounds on social and mainstream media that certain charges have been preferred against me by the Attorney General of the Republic, the Honourable Godfred Yeboah Dame.
Though I am yet to be formally charged in court, I have seen copies of the charge sheet in the media and wish to say without any fear of contradiction that these charges are nothing but a frivolous and politically motivated attempt by President Nana Addo Dankwa Akuffo-Addo and his hatchet man, the Attorney General, to silence me for performing my duties as the Ranking Member on the Finance Committee of the Parliament of Ghana.
But I want to assure the good people of this country, especially my constituents who elected me to represent them in Parliament, that I will not and cannot be silenced by the blatant abuse of prosecutorial powers by the Attorney General.
Ladies and Gentlemen: The investigation into the purchase of the ambulances, which is the basis for these frivolous charges, started in somewhere 2017.