The decision by the Bank of Ghana to challenge last week’s Court of Appeal ruling restoring the license of GN Savings and Loans is dampening expectations that financial institutions shut down during Ghana’s controversial financial sector clean-up exercise could eventually regain their operating licenses.
Industry analysts say the move is particularly significant because it comes under the administration of President John Dramani Mahama, whose 2024 election campaign included promises to review the revocation of licenses of some financial institutions closed during the reforms carried out between 2017 and 2021.
The Court of Appeal last week unanimously overturned both the Bank of Ghana’s 2019 revocation of GN Savings and Loans’ license and a subsequent High Court ruling that had upheld the central bank’s action. The appellate court described the revocation as “unfair and unreasonable” and ordered the restoration of the company’s license and the return of its assets and management to shareholders.
However, hopes among affected institutions that the ruling could pave the way for broader reinstatements were dealt a blow this week when the central bank filed an appeal at the Supreme Court seeking to overturn the judgment. According to court filings, the Bank of Ghana argues that the Court of Appeal erred in law in hearing the case and in its interpretation of procedural requirements.
Financial market analyst Joe Jackson, who is the CEO of Dalex Finance, said the appeal sends a powerful signal regarding the government’s actual intentions concerning the restoration of licenses.
“The Court of Appeal ruling had effectively given government and the central bank a legal and political pathway to revisit some of the license revocations,” he said. “If the current administration truly intended to restore some institutions, this case could have provided the rationale and precedent for doing so.”
He argued that the decision to resist the reinstatement “suggests there is no real appetite within government or the regulator to reopen the financial sector clean-up.”
The clean-up exercise, initiated under former President Nana Akufo-Addo and implemented by the Bank of Ghana under then Governor Ernest Addison, led to the collapse or revocation of licences of more than 400 financial institutions, including banks, savings and loans companies, microfinance firms and fund management companies.
The central bank justified the exercise on grounds of insolvency, poor corporate governance, weak capitalisation and widespread regulatory breaches that threatened financial system stability.
GN Bank became one of the most prominent casualties of the reforms. In January 2019, the Bank of Ghana downgraded GN Bank from a universal bank to a savings and loans company after it failed to meet new minimum capital requirements. The institution was subsequently renamed GN Savings and Loans. Seven months later, in August 2019, the central bank revoked its license entirely as part of the clean-up programme.
The institution’s founder, Papa Kwesi Nduom, consistently maintained that the revocation was unjustified and politically motivated. Following last week’s appellate court victory, Nduom described the ruling as vindication after “years of pain, job losses and destruction of businesses.”
But analysts caution that even if some licenses were restored through court action or political intervention, the practical revival of the institutions themselves would be extremely difficult.
Banking consultant Dr Richmond Atuahene has noted that many of the affected institutions no longer possess the operational infrastructure required to resume business.
“Most of these institutions have had their branches closed, employees laid off, assets disposed of and customer confidence severely eroded,” he said. “A restored license does not automatically recreate a viable banking institution.”
He added that the financial sector has also changed significantly since the clean-up exercise, with stricter capital requirements, tighter supervision and higher compliance obligations making re-entry difficult.
Some analysts also point out that the state spent billions of cedis in bonds and cash to protect depositors during the reforms. Reversing some of the closures could therefore create legal and financial complications regarding ownership of assets, liabilities and prior state interventions.
The Bank of Ghana has consistently defended the clean-up exercise as necessary to restore confidence and stability within Ghana’s financial system. Former Governor Dr Ernest Addison repeatedly argued during the exercise that many affected institutions were “deeply insolvent” and posed systemic risks to depositors and the broader economy.
Current Governor Dr Johnson Pandit Asiama has not publicly commented in detail on the GN Savings and Loans ruling, but the decision to pursue an appeal suggests continuity in the central bank’s institutional position despite the change in political administration.
For many former shareholders and customers of collapsed financial institutions, the Supreme Court appeal is now being interpreted as evidence that hopes of broad license restoration may ultimately prove misplaced.
“The expectation after the elections was that there might be a political solution,” said one Accra-based financial sector observer. “But if government is prepared to fight the GN case all the way to the Supreme Court, then it becomes difficult to believe that large-scale reinstatements are really being contemplated.
By: Toma Imirhe / businesspostonline
