Ghanaian banks fall on government securities to forestall impact of challenging economy

1
banks

With Ghana?s challenging economy threatening industry and commerce, banks have resorted to investing in government securities instead of lending to their other clients. senior banking executives conceded here on Wednesday.

banksPhilip Owiredu, Executive Director of Cal Bank, one of the leading banking institutions in Ghana, said the challenging economy had made it riskier to lend to individuals and businesses, hence the refuge in government instruments such as the Treasury Bill.
?The current situation is such that if you are not careful, you would have a lot of bad debt on your books. So if government is borrowing at a handsome rate which is more secure, we will invest in such government papers,? the senior banking executive explained.
Owiredu made these remarks on the floor of the Ghana Stock Exchange when officials of the bank took their turn at the Facts-Behind-the-Figures series to throw light on the performance of the bank over the past year.
While the 91-Day Treasury Bill has an interest rate of 25.1 percent, the 182-Day one has an interest rate of 25.8 percent.
The Bank of Ghana?s one-year note also has an interest rate of 22.5 percent while the two-year fixed rate note has a yield of 23 percent and the 3-year fixed rate bond has a rate of 23.47 percent.
?Non-Performing Loans (NPL) is a nightmare,? Frank Adu, Managing Director of Cal Bank, said.
According to him, the introduction of Credit Reference Bureaus, Collateral Registry and Borrowers & Lenders Act are good initiatives which, if they work, can save the situation.
?Credit Referencing has started picking up. It must however spread from institutional loans to individuals. That way, it will reduce the NPL ratio in the banking sector,? Adu added.
On high interest rates, Adu noted that they were not meant to be punishment but a reflection of the macroeconomic environment.
The Ministry of Trade and Industry (MOTI) held a forum last month on the high interest rates, and opinions were widespread on whether to blame the government or the banks.
In his opinion, Adu believed that the interest rates were pegged against the Policy Rate of the Bank of Ghana as well as other macro indicators such as inflation and Treasury Bill rates.
?A bank will not lend to others at a lower rate when government is borrowing at a higher rate,? he argued.
The MD however added that challenging as the economic situation was, the difficulties were not insurmountable. He said it would not also take short-term and knee-jerk measures to fix the economy.
Adu called for long-term measures to make the economy and currency of Ghana strong and resilient.
?If you earn one billion U.S. dollars in a year but your import bill is over two billion dollars, you will definitely have a deficit in the import cover,? he pointed out, calling for long term measures to deal with the Foreign Exchange (FX) crisis as well. Enditem.

Source: Xinhua

Send your news stories to [email protected] Follow News Ghana on Google News

LEAVE A REPLY

Please enter your comment!
Please enter your name here