Gov’t introduces 5% financial sector clean-up levy on banks’ profit-before-tax

Although the financial sector clean-up and the refund of monies to depositors have restored investor confidence and protected the hard-earned savings of millions of Ghanaians, it came at “a huge cost of over GH¢21.0 billion to the government”, Caretaker Finance Minister Osei Kyei-Mensah-Bonsu has said.

As a result, he told Parliament when he presented the 2021 budget and economic statement on Friday, 12 March that the government will “introduce a financial sector clean-up levy of 5% on profit-before-tax of banks to help defray outstanding commitments in the sector”.

“The levy will be reviewed in 2024”, the Suame MP told the house.

Meanwhile, the government is asking Parliament to approve GHS5.5 billion for use in paying the remaining customers whose funds were locked up with various financial institutions as a result of the financial sector clean-up exercise.

“Mr Speaker, the resolution of the banking industry has been completed while that of the 17 asset management companies (AMC) is ongoing.

“Out of an estimated amount of GHS8.5 billion, this august House approved an amount of GHS3.1 billion in July 2020 to settle investors of 30 failed AMCs.

“While the Securities and Exchange Commission (SEC) waits to obtain liquidation orders for the remaining 17 AMCs, it worked with the Ministry of Finance to provide a partial bailout of GHS50,000 each, paid to over 90,000 investors”, the Majority Leader said.

“Mr Speaker, for the Securities and Exchange Commission to fully settle investors of the remaining 17 AMCs, an amount of GHS5.5 billion (1.3% of GDP) is estimated to achieve that.

“For that reason, we have come to this august house once again to seek your approval to raise an amount of GHS5.5 billion in 2021 to complete the asset management industry bailout”, he said. 

Read below, excerpts of what the minister said with regard to the AMCs:

Bailout of Asset Management Companies for 2021

Mr Speaker, I am happy to announce that, the resolution of the banking industry has been completed. The government has been working to complete the bailout of the asset management industry through the provision of a bailout package for investors of the failed asset management companies (AMCs). Out of an estimated amount of GH¢8.5 billion to help pay investors of the failed AMCs, this august House approved an amount of GH¢3.1 billion in the 2020 Mid-Year Budget. At the end of December 2020, the Government had provided an amount of GH¢3.4 billion for the payment of validated claims to investors of 30 AMCs for which liquidation orders were obtained. This amount was in a combination of a 3-year marketable bond of GH¢2.5 billion and a 5-year zero-coupon bond of GH¢915 million. 

Mr Speaker, for the Securities and Exchange Commission to fully settle investors of the remaining 17 AMCs, an amount of GH¢5.5 billion (1.3% of GDP) is required. For this reason, we have come to this august House once again to seek for your approval to raise an amount of GH¢5.5 billion in 2021 to complete the asset management industry bailout, including Gold Coast Fund Management Ltd (now Blackshield Capital Management), First Banc Financial Services Limited, Liberty Asset Management, Beige Capital Asset Management Ltd, Ideal Capital Partners Ltd, and Frontline Capital Advisors Ltd.

Source:Classfmonline