Economist attributes fold-ups of UT, Capital Bank to poor Ghana economy

….As GCB moves into to rebrand premises of affected local banks                               

 Dr. Laud Mensah, an economist and senior lecturer at the University of Ghana Business School,, has revealed that the folding up of two indigenous banks paints a negative picture about the poor nature of the Ghanaian economy.

According to him, such an unfortunate situation reduces the concentration of local banks in the country and paves the way for the financial sector to be driven by foreign banks.

“Because if you take a look at UT Bank and Capital Bank, these are sole Ghanaian banks which in our banking system if we don’t take care and the sector turns out to be driven by foreign banks, we’ll end up having something we call capital flight or we’ll also have some of these foreign banks intentionally folding up and leaving the country with all their monies. But if the banks are local, I think we should be able to sustain our economy,” he stated.

Dr. Mensah’s comment comes at the backdrop of a statement issued by the Bank of Ghana informing the general public about its approval for the takeover of UT Bank and Capital Bank by GCB Bank, and noted that the Bank of Ghana has revoked the licences of UT Bank Ltd and Capital Bank Ltd due to severe impairment of their capital.

The statement further indicated that the approval by the Bank of Ghana of this transaction is to strengthen Ghana’s banking sector, ensure financial stability and protect depositors’ funds.

“The Bank of Ghana reassures customers of UT Bank and Capital Bank that their money is safe and they can continue to do business at their respective branches which are now the branches of GCB Bank,” it said.

Speaking during an interview monitored by this paper on Accra Fm, Dr. Mensah explained that the country’s financial system is dominated by the banking sector because Ghana as a country doesn’t have interest in investing in long term securities more or less going into bonds and equity market, and so having two local banks folding up shows how distressed the country’s economy is, and that alone sends a negative signal about the economy.

The senior varsity lecturer mentioned the unhealthy condition of the Ghanaian economy and the lack of support for local businesses as wrong signals that the current development in the country’s financial sector is sending out there to the world.

“If we turned up to have two local banks folding up then it send a signal out there that maybe the economy is not doing well, the economy is not supporting local businesses. That is why we can have banks that operate locally, that extends facilities to local businesses folding up in that form,” he added.

He further described the current development as a big shock that if not managed properly could have a contagious effect which will prompt customers of these financial companies to rush in to retrieve their savings and stressed the need for the managers of the takeover transaction to do well to manage the effect on customers’ expectations and reaction by being mindful of the kind of information churn out into the public domain.

“So we need to manage this situation very well and the kind of information we put out there and give some assurance to the people of Ghana that we still have banks in the country that can survive as far as management of this economy is concerned,” he noted.

Following the announcement of the takeover by GCB Bank, commercial premises of the two banks – UT Bank and Capital Bank – have undergone a speedy rebranding with logos of the affected banks replaced with that of GCB Bank.

 

 

Source: therepublicnewsonline.com

The Republic News Online

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