The banking sector – like the rest of the economy – has come out of a very difficult year. What is your assessment of how the Covid-19 shock impacted the sector, and what explains banks’ apparent resilience to the crisis?
Every sector and industry in the world has had to bear the carnage of COVID-19, and both Ghana and its banking sector have not been immune to the effects. Several lives have been lost, and people have faced unemployment due to a lack of demand.
For the Ghanaian banking sector in particular, the work from home options have worked wonders as the crisis has brought to the fore the possibilities of digital banking.
The regulator’s proactive stance has had a positive impact on the sector. Firstly, the pre-pandemic decision to strengthen the minimum capital base of the universal banks has borne fruits.
Secondly, the regulatory decisions and directives from the onset of the pandemic have also contributed to the resilience of the sector—including restrictions on dividend payment for capital preservation, reduction in the Basel III capital buffer, and the lowering of cash reserve ratios. The loan repayment moratorium directive from the regulator has also contributed to the resilience of the sector.
Is there any silver lining in the pandemic for the sector, and what lessons should banks draw generally from the crisis?
The global vaccination programmes posit an unseen benefit for global economies, including Ghana’s economy and banking sector. The rapid digitisation of banking services provides hope for the better, albeit without discounting the concomitant cyber security risks.
At the onset of the crisis, banks invoked their Business Continuity Plans (BCPs), and once the crisis is over, there will be a need to reevaluate such BCPs to tighten any loose ends that were identified.
The risk management architecture of banks will also need to be vigorously reexamined to tauten the credit analysis variables.
How much and in what ways will banking change after the pandemic?
In many ways, banking service delivery will change for better or worse.
The advent of digitisation of service delivery comes at an unplanned cost, resulting in higher cost to the ultimate consumers of banking services.
The new working-from-home culture also requires higher remuneration packages for staff as, in the words of US President Biden, there are expected to be “bumps in the road” to recovery.
Banks will need to explore alternate uses to the excess office accommodation constructed at very high cost during the pre-pandemic era.
What impact will the new financial sector clean-up levy have on the sector?
The levy met a mixed reaction from industry players, but on balance, if it’s a short term measure to remedy an externality, then it is most welcome.
If it is prolonged, as has been the case in earlier interventions, then the long-term impact will be passed on to the ultimate consumer to render consumption of banking services expensive.
How can banks support the post-Covid economic recovery?
The pivotal role of the banking sector in Ghana’s US$100 billion COVID-19 Alleviation and Revitalisation of Enterprise Support (CARES) initiative provides ample evidence of the supportive role in the economic recovery.
Coupled with the expected role to be played in the soon-to-commence Development Bank of Ghana (DBG) project, the sector is poised to assist in the economic recovery of the state.