Dr. Assibey-Yeboah said the appointment of blood relations and friends into executive positions at the expense of competence and the establishment of business lines without the required capacity are some of the key reasons why some local banks are struggling or have collapsed completely.

[contextly_sidebar id=”wuGOjVSW6UcVtg1hGNQZkT8ZdwwlXEv9″]”These are corporate management issues. It is for my father so I am the Managing Director and I am loaning out [Money]. They venture into things. DKM had DKM airport or something. They had cement companies. If you go into a lot of these, [you see that] they had a lot of business that they are not well vexed in,” he told the media in Parliament on Wednesday.

The MP was commenting on the recent insolvency of uniBank, an indigenous bank.

uniBank was found to have persistently maintained a negative capital adequacy ratio below zero making it technically insolvent. This contravened the 10% minimum capital adequacy ratio required.

uniBank also suffered liquidity shortfalls and consistently breached its cash reserve requirement.

As a result, uniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

uniBank’s insolvency followed the total collapse of two other indigenous banks, UT Bank and Capital Bank in August 2017.

UT and Capital Banks were unable to turn around their negative capital adequacy position, which necessitated a Purchase and Assumption agreement allowing GCB Bank to take over all their deposit liabilities and selected assets.

BoG intervention timely

Dr. Assibey-Yeboah, who is a customer of uniBank, said the Bank of Ghana’s (BoG) intervention is apt.

“It is the proper thing because if you are not careful and the bank goes under water, it is liquidated then I would have also lost my deposits at uniBank so what the Bank of Ghana did was the right thing to do.”

The BoG announced KPMG Ghana as uniBank’s administrator when it announced it had taken over the management of the bank. The central bank took the decision to save uniBank from total collapse.

Dr. Assibey-Yeboah said KPMG Ghana was well vexed to save the bank from collapsing within its six-month timeline.

“The administrator [KPMG] will go into the books and go after all the non-performing loans. So in six months, we should see a revival.”

Ailing Microfinance sector

The BoG has also said the problems in the financial sector are also reflected in the Micro Finance sub-sector.

The BoG Governor in a statement noted that the distress in this sub-sector has been characterized by “severely impaired capital; inability to meet regulatory capital adequacy requirement; generally low asset quality; and liquidity crises.”

“These have culminated in threats to depositors’ funds thus eroding public confidence and undermining efforts to promote financial inclusion,” he added.

Using figures to highlight the precarious situation, he said out of the total number of 566 licensed Micro Finance Institutions in 2018, 211 are active but distressed or have folded up.

Also, out of the total number of 141 rural and community banks, 37 are active but distressed or have folded up.

In total, it is estimated that 272 out of the 707 institutions in the sub-sector, representing 38.5%, are at risk.

“This indicates that approximately GHȼ740.5 million is owed to an estimated 705,396 depositors of the distressed or folded up MFIs and RCBs. In terms of significance, the deposits under distress form 8.81% and 52.49% of industry total deposits of RCBs and MFIs respectively.”

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By: Duke Mensah Opoku & Delali Adogla-Bessa/citifmonline.com/Ghana

The post Local banks’ struggles due to poor corporate governance – Assibey-Yeboah appeared first on Citi 97.3 FM - Relevant Radio. Always.

The Fiscal Electronic Device Bill is expected to connect all Point of Sale (PoS) devices with the Ghana Revenue Authority (GRA)’s systems.

The move is to ensure that VAT issuing companies do not under declare their values and also punish tax evaders.

The Chairman of the Finance Committee of Parliament, Dr. Mark Assibey Yeboah, tells Citi Business News he is hopeful the law will increase revenue from VAT.

“Most of the persons entitled to pay VAT do not issue receipts; so it leads to suppression of sales and the tax thereof so what we intend to do is to legislate so that every person entitled to pay VAT would have a cash register so that it will ring and this would also have backend where data would be transmitted to the Ghana Revenue Authority.”

Parliament on Thursday, February 22, 2018, took the Fiscal Electronic Device Bill through the second reading on the floor of the House.

Dr. Mark Assibey Yeboah is also confident the next stage would be facilitated next week to get the law passed as soon as possible.

“In essence, there will be better tracking and sales volume will be captured and then the VAT or tax thereof will be collected. So we intend to take the Bill to the consideration stage where the nitty gritties would be ironed out,” he indicated.

The decision to connect the PoS devices is in fulfillment of government’s plans to improve domestic revenue collection.

The move also comes at a time where the government has reduced the Special Petroleum Tax to 13% which is said to cost the economy at least million cedis in tax revenue losses.

For this year, the government is targeting total tax revenue of about 51 billion cedis.

This measures against the 62 billion cedis the government is targeting to spend for this year.

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By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post New law to track VAT electronically in the offing appeared first on Citi 97.3 FM - Relevant Radio. Always.