Dr Ernest Addison, BoG Governor
The Bank of Ghana (BoG) has revealed that commercial banks’ balance sheets saw growth in 2020 due to the government’s monetary policies and the increase in deposits mobilised from the Specialised Deposit-taking Institutions (SDI) sector, due to a flight to quality from depositors in the SDI sector.
It said that total deposits increased by 26.8 per cent while net claims on the government by commercial banks increased by 44.6 per cent. Meanwhile, credit extended to the private sector moderated throughout 2020.
“On an annual basis, net credit to the private sector slowed to 5.8 per cent in December 2020, compared with 23.8 per cent in the corresponding period in 2019. On a gross basis, credit to the private sector grew by 10.6 per cent, compared with 18.0 per cent over the same comparative period,” the BoG said.
This was conveyed in the 98th Monetary Policy Committee press release issued by the Central Bank on Monday.
Money/bonds market
According to the statement, interest rates on the money market broadly showed downward trends across the yield curve, as the “91-day declined to 14.1 per cent in December 2020 from 14.7 per cent last year, and the 182-day Treasury bill rate fell to 14.1 per cent from 15.2 per cent over the same comparative period.”
“On the secondary bond market, yields on 6-year, 7-year, 10-year, and 15-year bonds all declined. The rates on the 20-year bond, however, inched up marginally to 22.3 percent in December 2020 relative to 22.1 percent in December 2019,” it added.
It noted that the weighted average interbank rate declined to 13.6 per cent from 15.2 per cent, reflecting the reduction in the monetary policy rate in March 2020, and improved liquidity conditions on the market.
He added that the average lending rates of banks declined to 21.1 per cent in December 2020 from 23.6 per cent recorded in the corresponding period of 2019, consistent with the monetary policy stance.
It also noted that the banking sector showed resilience to the first wave of the pandemic supported by strong policy support and regulatory reliefs.
“Banking sector performance remained strong through end 2020, with robust growth in total assets, deposits and investments. Overall, the impact of COVID-19 on the industry’s performance was moderate as banks remained liquid, profitable and well-capitalised. Total assets increased by 15.8 percent, of which investments in Government bonds rose by 33.4 per cent,” it said.
“Solvency and liquidity indicators remained strong. The industry’s CAR of 19.8 percent as at end December 2020 was also well above the regulatory minimum threshold. Core liquid assets to short term liabilities were estimated at 27.8 percent in December 2020 compared with 30.5 percent a year ago. Net interest income grew by 20.9 percent to GHC11.2 billion compared to 24.9 percent a year ago,” it added.
“Net fees and commissions grew by 5.0 percent to GHC2.3 billion, lower than the growth of 16.5 percent recorded in the prior year, reflecting the dip in growth of credits and other trade finance-related businesses. Operating income rose by 17.9 percent whilst operating expenses rose by 8.2 percent, albeit lower than the respective growth rates of 21.1 percent and 12.1 percent in 2019,” the statement continued.
Re-appointment of Governor
Meanwhile, reports say that President Nana Akufo-Addo has re–appointed the Central Bank Governor, Dr Ernest Addison, for another four-year term, subject to confirmation by the Council of State.
His second term is expected to commence on March 30, 2021. For some analysts, Dr Addison’s first term has been credited with some reforms that have led to the stability of the banking sector. These include the recent clean-up, which the Bank of Ghana claims has put the sector in a strong position to withstand the COVID-19 shocks and recent challenges that have hit the economy.
He has also championed several reforms that have improved payments in the country, improving credit extension by commercial banks to businesses in Ghana.
Some analysts have argued that Dr Addison’s real test will be how he insulates BoG from any political pressures in regulating the banking sector and ensuring there is fiscal discipline because of its impact on inflation and the entire banking sector.
Background
Dr Ernest Addison was first appointed by President Akufo-Addo in April 2017, following the resignation of Dr Abdul-Nashiru Issahaku.
Until his appointment, Dr Addison was the Lead Regional Economist of the African Development Bank at its Southern African Resource Centre.
From 2003 to 2011, he served as the Director of Research at the Bank of Ghana; and was the Chief Economist of the West African Monetary Institute, from 2001 to 2002.
The Economics graduate of the University of Ghana, Legon, holds an M.Phil in Economics and Politics from the University of Cambridge, England, and PhD in Economics from McGill University, Canada.
About The Author
