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According to Prof. Bokpin, banks would have been worse off with the original DDEP offer

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Professor Godfred Bokpin, an economist, estimates that banks may have lost up to 80% if they had agreed to participate in the government’s initial plan for a domestic debt swap programme.

He claimed that the early opposition the effort faced served as the perfect catalyst for the improvements that were made to the contract.

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When the domestic debt swap initiative was first introduced in December 2022, banks and other labour unions criticised it.

The losses recorded on the banks’ books would have been higher than 80% if the institutions had allowed the initial domestic debt exchange, which was announced on December 5th and in which the Bank of Ghana risk-weighted the earlier bonds at 100%, rendering them unusable.

“So, you would see that there were a number of pushbacks and all of that also engineered some level of reforms or changes, amendments to the memorandum,” he said, according to a report from 3news.com.

According to the banks’ audited financial accounts, 15 out of 21 institutions suffered losses last year as a result of the debt swap plan.

Various uncertainties have been troubling Ghana’s financial and economic environment in recent years.

The losses, according to their 2022 Summary Financial Statements, were caused, among other things, by lower coupon rates and an increase in maturity from five to fifteen years.

With losses of nearly GH2 billion among the institutions in 2022, Consolidated Bank suffered the greatest losses.

Despite the fact that local banks suffered the worst losses, financial intermediaries saw some improvement in the first quarter of 2023.

In the meantime, six banks reported 2022 PBT (profits before tax) gains.

These include UBA (91m), GT Bank (191m), Societe Generale (172m), and FBN Nigeria (102m).

Absa Bank had the greatest losses from damaged assets, writing down $2.12 billion.

Then Consolidated Bank and GCB Bank wrote off 2.11 and 2.08 billion, respectively, following suit.

Although they recorded the least, FBN Nigeria (212 million), Bank of Africa (187 million), and Omni BSIC (149 million) all recorded significant amounts.

Consolidated Bank’s Capital Adequacy Ratio (-5%) was significantly below the industry average of 10%.

The three banks with the highest capital adequacy ratios in the banking sector were FBN Nigeria, Access, and GT Bank, with respective values of 57%, 37%, and 36%.

Many banks, including NIB and UMB, have not yet published their financial statements for 2022, according to a myjoyonline story.

As a result of the Domestic Debt Exchange Programme, however, it was reported that Ghanaian banks lost roughly GH15 billion in 2022.

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