Free Pass Allegations
In a new article making waves, Bright Simons breaks down what he sees as a troubling trend at the Bank of Ghana: the silent tolerance of insider deals that brought Ghana’s financial sector to the brink. If you think the 2017-2019 banking crisis was a one-off financial fiasco, think again. According to Simons, the crisis isn’t just history — it’s a cautionary tale that could play out again if regulators don’t step up.
The banking crisis that just keeps on giving.
Flashback to 2017-2019: the Ghanaian government shut down nine commercial banks, 411 non-bank financial institutions, and 58 investment houses, aiming to prevent a full-scale industry meltdown. But, as Simons points out, the costs just keep climbing. Initial estimates hovered around GHS 16.8 billion, but recent figures have climbed to a whopping GHS 25 billion. So why can’t we pin down the final tab? Simons suggests we look at the “insider” factor — former bank insiders left a financial black hole through asset stripping, fund diversions, and loans to buddies and relatives that made their mark.
Global Case Study
Insider dealings were the linchpin of Ghana’s banking collapse, and now, Ghana’s handling of it has become a hot case study for global institutions like the World Bank and IMF. Why? Because these insider deals were just too sweet. According to Simons, Ghanaian banks regularly handed out loans to friends and family, often without disclosure or oversight, practically guaranteeing trouble. For instance, non-executive directors received loans with a shockingly low interest rate of 1% — compared to the standard 35% rate. With terms like that, no wonder Ghana’s on the IMF’s radar.
Inadequate Regulatory Action
While the Bank of Ghana has introduced new corporate governance standards — they finally made banks disclose insider dealings in 2022 — Simons points out the glaring compliance issues. Research shows that most banks aren’t following these rules, and the Bank of Ghana’s regulations still fall short of global standards, leaving plenty of room for improvement. Simons suggests Ghanaian regulators could take a page from the Basel Committee on Banking Supervision, which calls for tougher stances on insider dealings. But so far, Ghana’s framework has yet to keep up.
Insiders Call Shots
In a system where bank directors can get loans at ridiculously low rates, Simons argues it’s no wonder there’s a conflict of interest. With directors getting financial perks on the side, the very people who should be keeping execs in check are left compromised. Worse, these practices may not only be unethical but potentially illegal under Ghana’s Companies Act, which regulates director perks.
Warning of Repeat
The real danger? If left unchecked, this “scratch-my-back” culture could lead to Banking Crisis 2.0. Simons warns that unless the Bank of Ghana starts cracking down, Ghana might see a repeat of 2017-2019, with insiders prioritizing personal gain over financial stability.
Call for Reform
In Bright Simons’ view, it’s time for the Bank of Ghana to get serious. He calls for stricter enforcement on insider dealings, enhanced transparency, and a policy overhaul that closes the loopholes insiders are all too happy to exploit. Because, as Simons makes clear, insider favoritism isn’t just a minor oversight — it’s a systemic risk that could destabilize Ghana’s financial sector all over again.
