A major campaign promise was made by the then biggest opposition leader, and now President John Dramani Mahama, ahead of the 2024 general elections, to restore licenses of the banks that, in his view, were unjustly collapsed during the banking clean-up exercise undertaken by the Akufo-Addo administration.
Then candidate Mahama’s promise was made after a claim by some of the directors of the failed banks that they were politically targeted by the NPP administration.
In 2018, some local banks collapsed when the central bank revised the minimum paid-up capital for existing banks and new entrants from GHS120 million to GHS400 million.
According to the regulator, this was to test the viability of the banks. The banks that were unable to meet this new requirement were either merged or collapsed.
Some nine local banks, 23 savings & loans companies, 347 microfinance institutions, 39 finance houses and 53 fund management companies closed down during the exercise.
UniBank, The Sovereign Bank, The Beige Bank, Premium Bank, The Royal Bank, Heritage Bank, Construction Bank, UT Bank, and Capital Bank all collapsed.
Some analysts and observers criticised the Bank of Ghana (BoG) and the Finance Ministry over the collapse of the banks because, in their view, these banks could have been saved to continue employing Ghanaians. The elections of 2024 were conducted on December 7, an election Mr Mahama won resoundingly- a one-touch victory.
President John Dramani Mahama’s resounding victory in 2024 gave the directors of the failed banks some renewed hope, at least, a campaign promise would be fulfilled to restore their licenses.
Seven months into office, President John Dramani Mahama’s Attorney-General (A-G), Dr Dominic Ayine, filed a nolle prosequi, to discontinue the criminal trial of the directors of Unibank, one of the failed banks, with the explanation that the directors had paid 60 per cent of the funds expected to be retrieved by the state. A claim which has been challenged by officials at IMANI Africa. But for purposes of this discussion, let us just assume the A-G was right.
For his part, Michael Nyinaku, the founder of Beige Bank, whose license was also revoked in 2018, has been acquitted by the court. The court says he has no case to answer.
Nyinaku was facing 43 counts, including “stealing, fraudulent breach of trust and money laundering – with accusations that he diverted over GHC1.2 billion (or even up to GHC 1.3 billion) from depositors between 2015 and 2018.
Among the alleged moves: Transfers of GH¢448 million in fixed deposits to Beige Capital Asset Management (BCAM), his other company. Transfers of GHC141 million from another 35 deposits to the Beige Group, a company wholly owned by Nyinaku. Creation of a fictitious First Africa Savings & Loans (FASL) account into which GH¢320 million was diverted. Additional misappropriations via vouchers and memos to companies he controlled.”
Dr Ernest Addison, Former Governor of the BoG, under whose tenure the banking cleanup exercise was undertaken
It is unclear whether the central bank, under Mr Mahama’s administration, will restore the Beige Licence given the CEO’s acquittal, but the president is expected to fulfil his campaign promise, so we anticipate his next step.
To ascertain whether or not the licenses of the failed banks would be restored, the Governor of the Bank of Ghana (BoG) Dr Johnson Asiama was asked a question during the 125th Monetary Policy Committee (MPC) press conference held at the Bank Square in Accra on Wednesday, July 29, whether he was under pressure to restore the licenses.
In his answer, the Governor said, “Not at all. Remember, the resolution for the framework is working. I came into office to find that a lot of progress had been made. Some cases are in court, some cases are undergoing certain forms of settlement, and so the process is on, and we will follow on with the process in that regard.
“The issue of what to do. It depends, for example, if a court reaches a decision and instructs us to go in a particular way, the board of the Bank of Ghana will look at that. But from where I sit, there is no pressure on me to restore any such unilaterally.”
The point is, whether the Governor is under pressure or not to restore the licenses, the campaign promise of President John Dramani needs to be fulfilled in order to keep faith in his administration.
But one point that needs to be made is that assuming that after all the audits, considerations, assessments, the court cases, a decision is taken to restore the licenses of the banks, it will not be an easy task for these banks to get back on their feet, recover all the lost customers and bounce back to take their roles in the financial sector.
Why do I say this?
Oftentimes, the impression is created that once the license is restored, the banks are good to go to resume business.
It is important for all to remember the level of damage done to the brand image of these institutions.
We need to know that brand perception is very important in marketing and especially for firms handling deposits of people. Brand perception is what customers believe a product or service represents and how it makes them feel, not what the company’s owners say it does.
So, the question is, what or how do the people perceive of the collapsed banks? Will the people have the confidence and trust to reinvest their funds into these same banks? Don’t forget that some customers lost their money, others were able to retrieve some, but that was a pyrrhic victory for them.
Currently, there is a trust deficit for the failed banks. In my opinion, it will not be easy to win the trust and regain the confidence of clients.
The other daunting issue for the failed banks is how and where they would get the minimum capital requirement to start all over again and regain their presence nationwide. Don’t forget that they lost their assets, landed properties, as well. So it will not be easy to recapture all these assets to commence operation, that is, if their licenses are restored.
The other issue they would have to deal with is international reputation. In Ghana’s banking sector, commercial banks are expected to have Nostro accounts. A Nostro account is an account that a bank holds with a foreign bank in the currency of the country where the funds are held.
Banks finance trade using their Nostro accounts. For instance, with the Nostro Accounts, importers do not have to carry US dollars to pay for their imports; banks are expected to fund that for them from these accounts.
Meanwhile, the Governor of the Bank of Ghana has served notice that the central bank will be monitoring the accounts of the banks to ensure they are in a good place to support importers and exporters with foreign currencies for their trade.
The main issue, now, is how confident will the foreign banks be in these failed local banks to enable them to operate their Nostro accounts. Even assuming they are cleared by the courts to resume operations, many entities will be sceptical in dealing with or engaging with them. Don’t forget that there is a trust deficit.
The importance of trust in banking and finance is key. This trust is a two-way street: clients must trust their bank to manage their wealth effectively, while banks must trust clients to be open about their financial ambitions and challenges.
So, will customers or clients trust these failed banks to manage their wealth effectively if they regain their licenses? The answer is obvious. I don’t think I will have the trust and confidence to put my money into these banks unless they squeeze water from stones to convince me that my wealth will be managed effectively.
Having said this, if any of the failed banks decides to resume operation, that is, if the licenses are restored, then they will have no option but to hire the services of top-notch branding experts to try to wipe the previous brand perception that clients have about them.
Branding or rebranding can come in different ways, including a change in name, colours, and logos. Of course, this will have to be done under strict supervision from the Bank of Ghana and other regulators.
Why is branding so important in banking and finance?
Branding builds customer loyalty, trust, and credibility. Establishing a consistent and reliable brand image creates a foundation of trust that’s important for financial decisions.
Your brand becomes a promise to customers, assuring them of your institution’s stability and dependability, according to Cross and Crown.
It also helps create an emotional connection, the key to stronger loyalty. Creating emotional resonance through branding is a powerful way to foster customer loyalty. When you tap into customers’ emotions, you create a connection that goes beyond simple transactions.
This emotional bond makes customers more likely to stick with your bank long-term and recommend you to others. Many successful banks leverage community involvement to create this emotional connection. By supporting local initiatives, sponsoring events, or offering financial education programs, you demonstrate a commitment to your community’s well-being.
So, these will have to be taken into serious consideration by the directors of the defunct banks.
Finally, the point ought to be made that merely restoring the license will not automatically present a ‘Menorah Candle’ to the directors. It requires serious work to bounce back.
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The author, Laud Nartey, is a Ghanaian journalist with special interests in Business Reporting, with over a decade of experience in journalism. He holds a Master’s Degree in Brands and Communication from the University of Professional Studies, Accra (UPSA).
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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.
