The financial system of Ghana has been under a considerable state of distress, with banks that were not meeting the capital adequacy requirement and others whose capital was eroded with high non-performing loans. Some of these banks were insolvent and

The financial system of Ghana has been under a considerable state of distress, with banks that were not meeting the capital adequacy requirement and others whose capital was eroded with high non-performing loans. Some of these banks were insolvent and illiquid, others were solvent but illiquid. This state of affairs was largely a result of poor corporate governance, false financial reporting, and insider dealings.

Questions

i. Trace the history of bank failures in Ghana from the days of Pyram and R5 to the recent happenings to banks and microfinance firms.

ii. Provide a brief account of how each of the nine banks went down recently.

iii. Expatiate on multilevel marketing (MLM) or pyramid schemes, link them to Menzgold, and show how they could lead to failure in the long run.

iv. Can we absolve the BoG of any blame in all these issues? 

v. What can be done to prevent a future recurrence?

• Expert Answer

i Ghana has experienced several bank failures in its history with the earliest recorded being the Pyram and R5 scandals in the 1980s Pyram was a Ponzi scheme that promised high returns on investments View the full answer