Alhassan Andani, a former president of the Ghana Association of Banks, referred to the recent financial crisis as an institutional one.

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This comes after certain stakeholders claimed that the government's choice to close down specific banks during that time was systematic.

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But Alhassan Andani sharing his view on the crisis said top industry players had taken note of certain banks' operations and adopted precautionary measures even before the regulator raised red flags against insolvent banks.

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He however said the Bank of Ghana should have realised the situation much earlier and taken the needed measures to salvage it but instead continued to provide liquidity support to some defaulting banks.

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“Instead of the regulator [BoG]… stepping in at the right time they were getting liquidity support. But typically, the liquidity support from the banking sector clears within the banking sector," Andani said in an interview with Accra-based Joy News.

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He further disclosed that the situation at the time saw key banks which were exposed to defaulting risks and believe that, collapsing such banks, would have had a resonant effect on the economy.

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“In the morning there will be a bank that has surplus cash and they know that I can’t use that because there’s a bank that has cash needs so you’ll throw it within a certain agreed limit and then it clears out the next day, all those are what we do,” Mr Andani revealed.

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“But when you’re cornered, you’re always out there in the market picking up someone who will say ‘what’s happening to this bank?’ Then people start to withdraw their [funds]. So, at the peer level, certain banks knew that other institutions within that space were not healthy enough and therefore cut off their lines of credit,” he explained.

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He continued, “That should have been a signal to the Central Bank. And if you go there for liquidity support number one and come back number two, there’s a problem. Somebody should be sitting there helping you to balance your assets and liability.”

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Mr Andani however opined that liquidity support for defaulting banks should have somewhat ended to allow some banks to collapse on their own merit.

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“...Yes, and then we would have had one institution gone and the others would be resolved, instead of trying to condone as many of them as possible then you had such a huge institutional impact. But even then, look at it, none of the top 10/12 banks were impacted because it was not systemic."

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“Systemic is where you believe that this bank was healthy and everybody was dealing with them and suddenly they couldn’t meet up. Then the default of one bank will affect a healthy bank because that healthy bank had exposures to the defaulting bank. That’s systemic risk," the finance expert said.

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“But in the case of what happened in Ghana, there was very little systemic risk because we know those that were already at the bottom ready to go,” he concluded.

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The financial sector clean-up exercise was undertaken in 2017 by the Bank of Ghana. It saw the revocation of operating licenses of some eight banks, 23 savings and loans companies and more than 400 specialised deposit-taking institutions (SDIs).

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BoG Governor, Dr. Ernest Addison has said among other things, the receivership process found that most directors of collapsed financial institutions failed in their fiduciary responsibilities to customers and other stakeholders.

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He added that while some of the directors could not account for the activities in their institutions, others were unable to account for depositors’ funds.

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