A Ghanaian banking expert has warned that banks and savings and loans companies with restored licenses will face extreme difficulty resuming operations. James Tetteh Hogrey states that a broken trust foundation severely limits their ability to succeed.
Hogrey explains that banking relies entirely on public trust, which was shattered during the 2019 license revocations. He believes that customers vividly remember their inability to withdraw funds during that period. This lingering memory makes it nearly impossible for these institutions to rebuild confidence with potential depositors.
This situation adds another layer of complexity to Ghana's financial sector stability efforts. The Bank of Ghana (BoG) undertook a massive cleanup exercise between 2017 and 2019. This exercise aimed to strengthen the financial system by addressing issues of undercapitalization and poor corporate governance. The BoG revoked the licenses of nine universal banks, 347 microfinance companies, 15 savings and loans companies, and eight finance house companies.
According to Hogrey, many of these institutions were already in deep trouble before their licenses were revoked. Some had negative capital adequacy ratios, meaning they did not have enough capital to cover their risks. Others extended over 80% of their loans to affiliated companies without proper oversight. One bank suspended operations in 79 branches and its entire management team without BoG approval due to insolvency. Another gave large loans to government contractors despite knowing the repayment risks involved.
Hogrey suggests that these widespread issues demonstrate poor management and questionable practices. He cited instances where large amounts of depositors' funds were transferred to outside affiliates without documentation. This violated financial regulations, including Section 19 of the Foreign Exchange Act 2006 (Act 723). These actions severely damaged public perception and operational integrity.
The expert stresses that even if courts clear these institutions of wrongdoing, the fundamental issue of lost trust remains. He states that he has never seen a bank with a revoked and reinstated license successfully rebuild client confidence. Attempting to restart operations under an old, tarnished brand, he argues, is likely to fail. He believes the defunct brands should be allowed to rest, highlighting UniCredit Savings and Loans as an example.
The financial sector will closely monitor any attempts by previously collapsed institutions to re-enter the market. Decision-makers within the BoG will need to weigh the potential for renewed instability against the desire for competition. The challenge of restoring trust among Ghanaian depositors remains a significant barrier for any returning entity. This scenario underscores the fundamental role of public confidence in the banking sector's health.