Banking Consultant, Dr. Richmond Atuahene, has opined that the Domestic Debt Exchange Programme (DDEP) has exposed the lazy conduct of banks operating in the country.
According to him, in the wake of the programme’s launch, most commercial banks were under the false impression that government securities were risk-free hence they had over-indulged in lending to the government beyond their single obligor limit.
“As I speak to you a bank had a bond of 9 billion as against a loan portfolio of 4 billion, twice the bonds because when I said it about two years ago in my delivery at Kempinski I said we’re doing what we call lazy banking,” he is quoted by myjoyonline.com.
“Lazy banking in the sense that we want an easy way out of banking, buy government bonds, buy treasury bills, declare good profit, declare good income, pay good dividend, but that is not banking. That is no banking. That is not how the British colonial masters taught us about banking. Banking, the regulation must be tough for both investments and as well as credit facility, but that was mute,” Dr Atuahene added.
He further expressed concern over the Bank of Ghana’s ‘loud silence’ in raising red flags on the matter which has left some banks at risk of insolvency due to the DDEP.
“So, the banks find it an easy way of going. And let me tell you a secret, some of the banks from other jurisdiction, you know some of them nearly exited when they saw these bonds, they called their board members and told them ‘Look the way you people are going there we’re afraid of it’.
“Some of them warned them, the mother companies warned some of the banks here. But the question is that because the enabling environment has been created for easy banking and lazy banking we ended up [here],” the Banking Consultant added.
Meanwhile, the Ministry of Finance has announced that over 80 percent of local bondholders signed on to government’s Domestic Debt Exchange Programme (DDEP).
This was disclosed in a statement by the ministry announcing the closure of the programme on February 14, 2023.
“The Government’s Domestic Debt Exchange Programme (DDEP) closed on Friday 10th February 2023 with over 80% participation of eligible bonds. The government wants to thank the people of Ghana for their forbearance and support throughout the very difficult times,” the statement said.
The ministry further emphasised that participation in the programme was voluntary and that the right of bondholders to self-exempt was never in doubt.
“However, under the circumstances, Government at the same time, always made a strong but humble appeal to bondholders to participate in the DDEP; seeing it as a very critical act of burden-sharing in the ongoing national effort to tackle the economic crisis, bring back microeconomic stability and guarantee sustainable growth and prosperity for the people of Ghana,” the ministry said.
MA/FNOQ
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Dr Richmond Atuahene, Banking Consultant and Economist