The process would show a reduction of Non-Performing Loans (NPLs) by the end of the year.
The GAB noted that the first quarter payment, after the initial deposit of GH₵250.00 million, was due to be paid on September 30, and was confident of the capacity of the Fund under Energy Sector Levies Act (ESLA) to make the quarterly payments.
Mr Alhassan Andani, President of the GAB and CEO of Stanbic Bank Ghana Limited made this known during a news conference after the Association’s 33rd Annual General Meeting (AGM) in Accra.
He said the banks would receive the two quarter payments this year; September and December, and based on the capacity of the ESLA, which was the source of the payments, could reclassify the NPLs on the books of banks to performing loans.
He noted that a similar arrangement is being made to restructure the NPLs of other energy sector State Owned Enterprises (SOEs) including GRIDCO, Electricity Company of Ghana and Tema Oil Refinery (TOR) and if successful, would have a similar impact of reducing NPLs on the books of banks.
He said the restructuring initiative is being driven by the banks and not being ‘shoved down their throats’ by government.
Mr Andani said the GAB is negotiating an arrangement regarding Bulk Oil Distributing Companies (BDCs), which would also address NPLs in that area.
The arrangement seeks to restructure the total VRA debt to the banking sector of GH₵2.3 billion. An upfront payment GH₵250 million has been made, and the remaining restructured over a five-year period with quarterly principal and interest payments.
Mr Andani also stated that although there are high levels of NPLs in the banking industry, mainly from it its exposure to the energy sector, it does not affect their decision on whether or not to give loans.
Answering a question on whether the high level of NPLs informed banks willingness to make loans to businesses, he said NPLs do not take banks to a position where they do not make loans but rather helps them to make better decisions and inform how they deal with particular portfolios.
He said most of the NPLs now are in the government related energy sector SOEs and thus does not affect other sectors like oil and gas and manufacturing, where they could keep doing business based on their liquidity.
Dr Abdul Nashiru Issahaku, Governor of the Bank of Ghana (BoG), who gave the keynote address at the 16th Annual luncheon of the GAB, following the AGM, said the restructuring of energy related debts of SOEs would further support the performance of the banking industry, which he noted, remains stable, solvent and liquid, evidenced by the key Financial Sector Indicators.
He stated that under the debt restructuring exercise, the legacy debt of the TOR over a 10-year period would also commence on September 30.
“As part of the arrangement, TOR will pay an initial investment amount of GH₵ 150.00 million to the lenders and this would be invested over a 10-year period at a rate of 20 per cent per annum,”, he explained.
He said the initial investment amount would cater for the principal repayment whilst interest payments would be made from the ESLA and TOR’s internally-generated funds.
He outlined other reforms being spearheaded by the BoG in the sector including the passage of the Banks and Specialised Deposit-Takers Bill, which is currently awaiting presidential assent, the Non-Bank Financial Institutions Act and the Ghana Deposit Protection Bill, among others.
Dr Issahaku said the BoG would continue to pursue programmes and policies aimed at developing a vibrant financial system capable of harnessing financial resources for the development and growth of the economy.