Kufuor expresses worry over
banks' slow response to declining macroeconomic
indicators
Accra, Nov. 21, GNA - President John Agyekum Kufuor
is worried over the slow responsiveness of financial
institutions especially the banks to reduce the
lending rates given the overall improvement in
macroeconomic indicators.
Mr Kwadwo Baah-Wiredu, Minister of Finance and
Economic Planning, who announced this on Monday
said: 'His Excellency is particularly pained that
the banks in particular have not quickly responded
to the declining macro economic indicators for the
greater public good and to move the growth agenda
forward as expected.'
Presenting a paper to open the 10th National Banking
Conference Lecturers in Accra on the theme: The
Impact of Banking and Financial Services Industry on
the Country's Economic Development' he said
President Kufuor was not happy about the slow
decline in lending rates to the private sector as
well as the high cost of operations of the banks
compared to international practices.
The Minister said a cursory look at macroeconomic
and financial indicators generally attested to the
worrying thoughts within the financial sector.
'Despite consistent declines in the prime rate from
18.50 per cent in 2004 to 14.5 per cent as at date,
lending rates are still sticky downwards despite
increased liquidity of banks due to the abolishing
of the secondary reserves requirement,' he said.
Assigning some possible reasons to the slow
responsiveness in the past, Mr Baah-Wiredu cited the
cushion or premium cost inefficiency in operations
due to huge mismatch of assets and pricing for a
long period of time, crowding-out by government and
lack of collateral and other credit requirements by
banks.
He said the circumstances had changed but realigning
operating cost downwards to match declining income
from their assets had become a mirage and a short
term uncertainty.
In addition the Minister mentioned psychological
fear and uncertainty as other factors which by
themselves were risks and therefore preventing the
banks from positively responding to the already
established favourable macroeconomic indicators as
at now.
He said there were still about 40 per cent of cash
with the non-banking public outside the banking
system thereby affecting the rate of diversifying
income creation by banks.
Mr Baah-Wiredu said the Government was determined
and committed to support and reforms the financial
sector to be the key driver for the private and the
other sectors of the economy to offer and deepen
pro-private sector policy initiatives as well as
institutional and legal and regulatory framework.
GNA
