Ghana’s banking sector was undercapitalised for much of the decade preceding the 2017 cleanup, with weak governance and risk-management practices across parts of the system, former Bank of Ghana First Deputy Governor, Dr. Maxwell Opoku-Afari, has revealed.

🇬🇭 Here's What Happened

According to hm, the 2017–2019 banking-sector clean-up and recapitalisation was therefore critical to restore confidence and strengthen prudential standards, including by resolving weak institutions and reinforcing governance in line with core supervisory principles.

In a paper titled “How not to Miss a Crisis: Lessons from Ghana”, he said the fiscal costs were, however, significant.

The paper highlighted the International Monetary Fund’s (IMF’s) 2024 review of Ghana’s Economic Credit Facility (ECF)-supported programme, the resolution and clean-up costs of the domestic banking system that reached about 7.1% of Gross Domestic Product (GDP) over 2017–2021, largely absorbed by the state in the absence of an effective deposit insurance framework at the time.

📌 Key Details

In addition, the paper revealed that the recapitalisation bonds equivalent to about 2.6% of GDP were issued to support undercapitalised banks as part of broader financial-sector strengthening following the Domestic Debt Exchange Programme (DDEP).

These interventions illustrate a “spillback” from the financial system to the budget to safeguard financial stability and depositor confidence.

Dr. Opoku-Afari continued that these weaknesses — persistent fiscal deficits, weak revenue mobilisation, quasi-fiscal operations, and rising sovereign exposure within the banking system — were visible well before the crisis.

“Yet political incentives and overly optimistic assumptions contributed to delayed recognition and corrective action by key domestic and external stakeholders, until risks crystallised”.

According to him, this disconnect between underlying fundamentals and financing conditions raised questions about risk pricing, the effectiveness of domestic oversight, and the extent to which surveillance frameworks adequately captured liquidity and rollover risks.

He added that this feedback loop is central to understanding the subsequent domestic-debt build-up.

📰 Source: Joy Online Ghana