He said discussions in that regard were already ongoing, adding that the issues of recapitalising NIB would feature heavily in discussions with the International Monetary Fund (IMF) during the upcoming review in April.

Under the country’s three-year programme with the IMF, the BoG has committed to completing the remaining tasks from the financial sector clean-up, and these tasks include addressing the insolvency of NIB as well as the long-standing under-capitalisation of several special deposit-taking institutions (SDIs).

At the July 2023 Monetary Policy Committee press conference, Dr Addison in responding to a question by the Graphic Business on NIB said the issue of NIB and other under-capitalised institutions would ).
obviously form part of the financial sector policy under the IMF programme.

 

He said once the government was done with the immediate issues of the impact of the Domestic Debt Exchange Programme (DDEP) on banks, it would go back and relook at these institutions and make an assessment on whether they were still viable or not.

“NIB is one of the banks that we will make that assessment on, to ascertain whether it is still viable or not. If it is viable and the government can find money to recapitalise it, then Yes. 

But if it is not viable, then, obviously, we will have to find a different use for that instrument.

“These are ongoing discussions between us and the international partners and I believe in the next year or so, we will get a clearer sense of how to handle those particular institutions that are very weak,” he stated. Giving an update on this assessment at the 117th MPC press conference in Accra yesterday, the Governor said the assessment has been completed with a commitment from the government to recapitalise NIB.

NIB challenges

Following the completion of the financial sector reforms, all the banks operating in the country successfully recapitalised to GH¢400, except NIB, who are yet to do so.

The NIB, together with four other banks, namely ADB Bank, OmniBSIC, UMB Bank and Prudential Bank, were given government guarantee through the Ghana Amalgamated Trust (GAT), which was a special purpose vehicle set up to help these five banks recapitalise.

NIB, however, failed to utilise this opportunity as its liquidity and capital challenges far exceeded what was originally envisaged and have still remained under-capitalised. With the bank being a state bank, the considerations were different, and, therefore, the bank has continued to operate till now, despite not meeting the new minimum capital requirement.

 
ADB take over

The commitment from government to recapitalise the bank will now put to rest speculations that the government was considering the takeover of the bank by ADB Bank.

Talks of a merger between the two state-owned banks are not new, as former Finance Minister, Ken Ofori Atta, in 2017 hinted of a merger of the two banks to form a Development Bank.

The Finance Minister at the time argued that a merger of the two banks could help create a development-oriented bank that could finance the government's vision of transforming the economy through increased investments in agriculture and industrialisation.

This position was then supported by the Governor of the Bank of Ghana, Dr Ernest Addison, who also argued at the time that it made sense for the government to merge the two banks, citing the challenge of the state having to recapitalise the two banks separately.

Outstanding legacy issues 

Commenting on other unresolved financial institutions, Dr Addison said those were outstanding legacy issues which might take time to gradually resolve. It will be recalled that in the 2024 budget, the government made a provision of GH¢4 billion to address the liquidity issues of distressed Special Deposit taking Institutions (SDIs) in the country.

The Governor said that amount was not adequate to solve all the issues in the sector as claimants under the Securities and Exchange Commission (SEC) were also clamouring for part of the money. “Some money has been set aside in the budget but that will not fully resolve that matter.” 

There are investors with SEC who are also clamouring for payment. “So we need to meet all the claimants at some level and between the Ministry of Finance and the BoG, some decisions would have to be taken on how much of it will have to be used to resolve SEC claimants and how much of it should be allocated to bank claimants,” he stated.