Economist, Professor Godfred Bokpin has allayed fears of liquidity challenge faced by some financial institutions, especially banks, in the country describing it as not alarming.
Information gathered indicates that some banks have got a portion of their funds locked up in the debts owed by some state, as well as some private sector owned energy companies.
Also, some financial institutions are reported to have their finances locked up, following unpaid loans emanating from the housing sector.
But speaking to accra based citifm, Professor Bokpin was of the view that even though some banks are illiquid the situation is not alarming, hence no need to panic since banks in the country are able to meet their deposit-withdrawal request.
“Generally with the level of regulation that we have I don’t think that it should create some panic that banks are unable to meet deposit-withdrawal request. But the situation also reflects their challenge in meeting short term financial obligation,” he said.
He stated that the challenge may have come from some banks taking risky investments in areas they do not have adequate expertise on.
“It may be that some of the banks have taken risky positions in certain ventures they do not have requisite expertise. Probably in oil and gas, probably with the BDCs, probably with SMEs. But I don’t think the level is alarming,” he assured.
According to him, the macroeconomic environment of the country has not proved favorable to the banks, showing in an increase of bad loans recorded in the 2015 financial sector performance.
“Generally you would have accepted deposits, turn it round keep some as required reserve and then do business with the others. You want to be able to earn sufficient return on that one to be able to cover your operational cost and also meet how much interest you would have guaranteed on the deposits,” he said.
All these challenge, Professor Bokpin pointed out has put pressure on the banks to move some of their fixed assets to meet short term demands, with little success.
He, however, stressed that the banks are capable of overcoming the challenges.
Source: citibusinessnews