Banks’ total investments in government Treasury Bills and other securities is expected to go up by 6.0% to 48% this year.
This is due to the expected huge borrowing by government on the domestic market to finance the budget deficit.
But the move could also crowd out the private sector from getting access to funds.
Managing Director of Bank of Africa, Kobby Andah at a recent Ghana National Chamber of Commerce Joy Business Budget seminar said customers will continue to invest in government securities if government continue to borrow so much on the domestic market.
“The other thing is that customers who put deposits in banks and maybe at most will get something like 12% will migrate and put their monies into government securities. But the largest pressure is going to come from the interest rates because for government to increase its stake by GH¢25 billion, some kind of incentives to the market and this might come in the form of additional interest rate”.
“So there are two elements here – one the availability of liquidity and the second is the cost of the money to the private sector”, he explained.
5% tax on banks profit before tax to impact on banks operations
On the 5 percent financial sector levy clean-up imposed on banks, Mr. Andah expressed unhappiness that the banking industry will bear the entire cost.
According to him, there is the need for transparency regarding the clean-up.
“What is even more difficult to understand is it gives the impression that the good banks are being punished for surviving the crisis [financial sector troubles]. We wonder why we don’t have transparency in the receivership process. If our monies have been used to bail out these banks, receivers have been appointed, we need to know what is happening”.
“You can’t just damp the burden on somebody else to pay. I think these are issues that have to be looked at critically. There is the need for more transparency, we need to know what’s happening with the prosecution, how much has been recovered, it has to be transparent”, he emphasized.
BoG urged to extend some reliefs banks are enjoying
The MD of Bank of Africa also urged the Bank of Ghana to extend some reliefs the banks are enjoying, including the reduction of the primary reserves to 8%.
“Some of the reliefs, we are already enjoying them. For example, the reduction in provision, what we call “OLEM accounts” to 8 percent; we are just hoping that it will be extended because it was granted for a year. We’re also hoping that the relief the Central Bank gave us to reduce our primary reserve to 8% will be extended. I think that has been done actually,” he noted.
Also, Mr. Andah called for more regulatory reliefs to enable banks to lend more to the capital market.
“We ask for additional relief where it is the same on the primary reserve. What happens is, for every deposit you take, you have to put a certain percent in the Central Bank. Almost like a security deposit in case anything happens and is also for liquidity management.”