A management consultant and retired Board Chairman of Standard Chartered Bank Ghana Limited, Dr Ishmael Yamson, has stated that the efforts by the Bank of Ghana (BoG) to clean the banking sector should not be a debate between local and foreign banks.
According to him, there was the erroneous impression that all local banks were not doing well when, in fact, some local banks, including Fidelity Bank, CAL Bank, GCB Bank, Universal Merchant Bank and Agricultural Development Bank, were performing well.
Describing as misleading the growing perception that the clean-up was targeted at indigenous banks, he said the narratives should rather be on poorly governed and properly governed banks and steps to take to build a robust banking industry.
Speaking to the Daily Graphic in Accra, he said the current mindset that the BoG was targeting local banks was an attempt to divert attention from the real cause of the collapse of the seven banks, which he explained was the total disregard for good corporate governance practices.
“We should move away from the narrative of local banks against foreign banks because it won’t help us. We should be talking about well-governed banks against poorly governed banks and if our local banks fall within the poorly governed banks, then we take action and make them aware that this is not how to run successful banks,” he said.
Dr Yamson, who oversaw the transformation of the Standard Chartered Bank as Board Chairman, said he was confident that the BoG would have equally revoked the licences of majority of the foreign-owned banks if “they behaved the same way that these local banks behaved”.
Dr Yamson retired as Standard Chartered Bank’s board chairman in June this year, after 13 years at the helm.
As chairman, the bank consolidated its position as a tier one lender, targeting the upper and the middle classes, and maintained strong growth in top and bottom line throughout the period.
Over the last 12 months, seven banks with indigenous majority shareholding have collapsed for breaching various regulatory requirements.
The revocation of the licences of the UT and the Capital banks in August 2017 and those of the Sovereign, uniBank, Royal, Construction and BEIGE banks in August this year prompted concerns that the BoG was being too harsh on local banks rather than propping them up.
But Dr Yamson, who also chairs the board of Scancom Ghana Limited, operators of MTN, said such concerns were misplaced and disingenuous.
“I get worried when we divert attention from the core reasons these banks failed to merely accuse the central bank of undermining the viability of local banks.
“The banks did not fail because they are local banks. The banks failed because they simply failed the test of good corporate governance. After all, we have local banks that are doing well,” he stated.
He added: “What caused their failure was simply total disregard for good corporate governance practices; that is the bottom line. These banks, with impunity, disregarded what they were required to do as banks,” he said, citing the reported misapplication of the central bank’s emergency liquidity support to the failed banks.
Therefore, Dr Yamson said, rather than categorise banks into local and foreign banks, depositors should understand that the BoG’s clean-up was targeted at “poorly governed banks” that had, over the years, failed to abide by corporate governance practices, obey basic banking laws and, in the process, exposed depositors to risks of losing their savings.
Capital not enough
He said it was important for the country to choose between poorly governed banks that attracted innocent people to deposit, only for the money to disappear, and banks that were properly governed and protected the interests of depositors and other stakeholders.
He also warned that recapitalisation and bank consolidation were not the panacea for poor corporate governance, explaining that they were “only a first step”.
“Governing a bank is a huge enterprise. It starts from the people you appoint to run the bank — do they have the competence, skills, leadership quality and integrity?
“These should be primary. You can merge and you can even raise GHc1 billion, but if the quality of the people you appoint to manage the bank is poor and the central bank’s supervision and oversight is poor, we will have a repeat,” he added.
Dr Yamson praised the BoG’s new directives on corporate governance as solid and called for strict enforcement to help sustain the gains in the sector.
Together with similar directives from the Securities and Exchange Commission, Dr Yamson said he was optimistic that they would deliver a resilient financial sector that would serve as an anchor to economic growth.