Need To Strengthen The Banking Sector

NEWS COMMENTARY ON THE NEED TO ENSURE A SOUND BANKING SECTOR FOR THE PROMOTION OF ECONOMIC DEVELOPMENT

A sound banking sector is very necessary for the economic development of a country. It helps to generate public confidence in keeping money in banking institutions, a practice that makes it possible for easy mobilisation of excess cash which is usually channeled into productive ventures in the economy. Deposits of customers with the banks ensure that idle funds are channeled into areas in the economy where they are mostly needed. This prevents individuals and organisations from keeping their money at home at the risk of the safety of such funds. It is for this reason that the banking sector ought to be rigidly regulated to perform efficiently in support of national programmes. When the banking sector does not perform efficiently, loss of confidence resulting from this disturbs the entire economy and throws business operations out of control. The regulator of the banking sector ought to apply all regulations as rigidly as possible to ensure that the financial sector is placed on a sound footing.

The recent collapse of certain banks in the country is quite disturbing because of perceived uncertainty relating to the safety of the deposits that are kept with the banks. This apart, the affected members of banking staff become uncertain about their fate, that is, whether they will be retained as working staff or be rendered redundant. Redundancy in this case has its own problems. For example, one cannot be sure whether severance packages can be arranged for affected staff. All these tend to create tensions in the economy and should therefore be avoided as much as possible. It is for this reason that as has been pointed out by President Akufo-Addo anyone whose action or inaction might have contributed to the problem ought to be disciplined. People appointed as members of the governing board of all banking institutions must be seen to be competently qualified for the task. Again, the rules of banking ought to be rigidly enforced by the regulator without fear or favour so that the purpose of banking can be attained at all times. It is equally important to note that members of governing boards of banking institutions  as well as their management ought to operate transparently and, where they default, be severely punished according to law. If such measures are rigidly implemented to the letter, it will prevent any banking crisis in the country and do away with possible derailment of the foundations of economic growth. In line with this, it is important to continuously adopt a preventive approach to address such challenges instead of allowing such problems to emerge before thinking of steps to take to correct them. The implication is that early warning signs ought to be taken seriously to prevent what has occurred to some of the banks. When non-performing banks are consolidated, the intention of the regulator is to prevent total loss of deposits. The consolidation into a new bank however has its own problems in the sense that apart from retrenchment of staff, the Central Bank will have to look for funds, usually from the taxpayer, to support the new entity. If things had been organised in a better way in the past, such an amount of money could have been used for other profitable developmental ventures. It is therefore necessary to pay attention to corrective measures aimed at streamlining banking operations in the country. This is what the sector needs for real success.

BY: DR. KOFI AMPONSAH-BEDIAKO, DIRECTOR OF CORPORATE COMMUNICATIONS, GHANA STANDARDS AUTHORITY.