In an interesting turn of events, it is emerging that a scheme created to salvage some local banks has now become a threat to their very survival.
The Ghana Amalgamated Trust (GAT), created as a rescue mission for struggling indigenous banks, is now being described as a crushing financial burden.
This is the observation of financial and corporate governance consultant, Dr. Richmond Atuahene.
An analysis by Dr. Atuahene, cited by The High Street Journal, reveals that GAT has morphed from saviour into “an albatross” around the necks of participating institutions, demanding another urgent rescue mission to halt the impending danger.
Born Out of Crisis
GAT was set up by the Ministry of Finance as a Special Purpose Vehicle (SPV) to help selected indigenous banks meet the new minimum capital requirement of GHS400 million imposed by the Bank of Ghana following the financial sector crisis and the subsequent cleanup.
Dr. Atuahene’s analysis explains that through a bond programme of up to GHS2 billion, which was largely funded by private pension funds and other institutional investors, GAT injected Tier 2 capital into beneficiary banks.
The bonds were listed on the Ghana Fixed Income Market to provide liquidity to investors. The objective of the SPV was to recapitalise local banks, strengthen them, and make them competitive.
But the cost of that capital, Dr. Atuahene argues, has proven devastating.
The 19.1% Annualized Interest Burden
The core of the problem is the interest rate. Dr. Atuahene says GAT’s funding came at a compounded annual rate of 19.1%, plus a 1% management fee.
This came at a time when post-Domestic Debt Exchange Programme (DDEP) government bonds were yielding around 9%. This, right from the onset, implied that the 19.1% compounded rate stands out as exceptionally high.
The impact on the balance sheets of these banks, the financial analyst says, has been very telling.
He reveals that one bank that secured GHS243 million in 2020 under the scheme saw that obligation balloon dramatically due to compounding. By December 2023, the unpaid Tier 2 capital had grown to approximately GHS490 million. By mid-2024, it rose further to GHS531 million, and by June 2025, it had surged to GHS632 million.
To put it simply, in five years, a GHS243 million capital support nearly tripled. For institutions already battling non-performing loans, economic headwinds, and post-DDEP restructuring effects, such exponential growth in liabilities has significantly weakened balance sheets.
“The funds were provided at high interest rates (around 19.1%) combined with a 1% annual management fee, which created intense financial pressure on the banks. The cost of capital provided seemed to be unreasonably too high at 19.1% at a compound rate on year to year,” Dr. Atuahene indicated.
From Capital Support to Financial Strain
The impact of the high compounding interest, the financial analyst reveals, is crumbling. Instead of easing operational pressures, the high cost of capital has stifled core banking activities.
Dr. Atuahene indicates that, per his analysis of the financial statements of the participating banks, they appear financially distressed. The heavy interest burden reduces profitability, limits lending capacity, and constrains expansion.
To put it bluntly, the money meant to strengthen them is draining them.
The compounded structure means unpaid obligations grow rapidly, creating a looming overhang that clouds future sustainability.
He noted, “GAT’s intervention had been criticized for using high-interest, equity-linked funding which had become a massive financial burden on the very indigenous banks that participated in the model.”
Some Pension Funds at Risk
The looming danger, he says, extends beyond the banks themselves. Private pension funds, through GAT, hold significant equity stakes in some of the participating institutions.
This signals that if any of the banks fail or require further restructuring, the shockwaves could ripple into the pension sector.
This is because in a tightly interconnected financial system, distress in one segment often spreads. A struggling bank can undermine investor confidence. Pension exposure can magnify systemic vulnerability.
If the GAT structure falters, it may not only affect banks but also threaten retirement savings tied to Tier 2 pension schemes.
The Bottomline
A scheme designed to promote sustainability has become an albatross on the necks of participating indigenous banks. Contrary to the core objective, a recapitalisation meant to strengthen capital buffers without suffocating institutions is now doing otherwise.
Dr. Atuahene is therefore calling for a review of the model before more serious damage occurs. Without intervention, the compounding obligations could continue to erode capital positions and investor confidence.
