Tell your child that, the Banks initially received Liquidity support running into 100s of millions and wasted it. Capital Bank received a total of GH¢620 million in Liquidity Support from the Bank of Ghana (BOG).
The facility came in three tranches – first GH¢150m (June 2015), then GH¢300m (September 2015), and finally GH¢170m (November 2016).
Capital Bank received GH¢620 million and spent part of it on things other than saving the bank as it was intended, leaving the bank still distressed.
Tell him/her, that the country already tried to save the banks by giving them money and still didn’t yield any results. Tell them that, thousands of depositors’ funds needed to be protected.
Tell your child, An asset quality review carried out by the BoG in 2015 and 2016 revealed severe challenges with solvency, liquidity, and asset quality in Ghana’s banking industry, with some banks showing significant under-provisioning and capital shortfalls. TAKE NOTE: H.E JOHN MAHAMA’s report showed the banks were already not in Business. Tell the child that as well.
Tell your child that when H.E JOHN MAHAMA realized the Banks were insolvent, he tried the option of giving them money to revive. This initial funds giving them was squandered and there was no justification to give them more other than merging them to save depositors funds and create a stronger financial service. What it means is that the option of saving the banks was tried already before the mergers. Your children deserve to know the facts. Tell them that.
Tell them that, a stronger and more resilient financial services sector was needed and without that, we would have experienced a devastating financial sector crisis with more dire consequences for our economy.
But Most importantly, DO NOT tell your child that banks collapsed. Tell them the truth, which is that, Banks were Merged and others exited because they were not able to meet the regulatory requirements needed to operate as a Bank in the interest of the sector and depositors.
“The outcome of the BoG’s recapitalization process is an industry made up of a smaller number of well-capitalized banks. “Following the exercise, all the key financial soundness indicators in terms of solvency, liquidity, efficiency, and asset quality have improved. The provision of capital buffers by banks under the Basel II and Basel III framework has also ensured that banks are more resilient to shocks,” – Ernest Addison, Governor of the BoG
BUT BEFORE you end this conversation with your child. Remind them about a few important things;
Remind them about how Banks could not afford to pay even their staff let alone depositors
Remind them about how depositors could visit banks for a whole week without success just to withdraw their deposits
Remind them about how Banks struggled to provide credit and capital support to Businesses due to poor liquidity and burdened Non-Performing Loans (NPLs)
Remind them about how depositors were always being given excuses with “system is down, System is down” simply because the Banks had no money to pay depositors.
AND THEN Finally apologize to them for almost misleading them to believe the state just got up to collapse Banks without any attempt to save them when indeed that wasn’t the case.
YOUR CHILD DESERVES THE TRUTH
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Source: Dennis Miracles Aboagye