Banks deny earning excessive profits due to interest rate accusations
Ghana Association of Banks (GAB) refutes allegations of market manipulation by banks
The Ghana Association of Banks (GAB) has disputed claims that banks in the country could be benefiting from the differences between lending rates by taking advantage of the gap between the Monetary Policy Rate (MPR), Treasury Bill Rate (TBR), and Ghana Reference Rate (GRR).
John Awuah, GAB's designated contact person, described such assertions as 'impossible', citing measures instituted by the central bank to prevent such occurrences. He made these remarks in response to the Institute for Economic Affairs (IEA) commentary on the upcoming Monetary Policy Committee (MPC) meeting of the Bank of Ghana (BoG).
In its analysis, the IEA noted a potential for 'round tripping' — an unethical market-manipulation technique — arising from the disparity between the MPR, TBR, and GRR, suggesting that commercial banks could exploit the gap for profit.
However, Awuah stated that the central bank closely monitors the activities of all banks, particularly those it lends to, rendering market manipulation nearly impossible. He emphasized that the central bank serves as the lender of last resort, providing liquidity only after banks have exhausted other options, and assessing each bank's position in the market before granting loans.
Despite the MPR lagging behind the TBR and GRR, with the former hovering around 30 percent and the latter at 26.5 percent, while the MPR remains at 22 percent, the IEA suggested that this discrepancy represents a distortion of money market returns, potentially enabling round tripping.
According to the IEA, for commercial banks to avoid unscrupulous behavior, interest rates must be realigned to close the MPR-TBR and MPR-GRR gaps. While some analysts, including the IEA, predict that the central bank will maintain the MPR at 22 percent following its next meeting, the tight economic conditions could push government bond yields higher. Consequently, the GRR, which was at 13.9 percent at the start of the year, could also rise, widening the gap with the MPR.
Despite the economic challenges and potential implications for bank lending practices in Ghana, no concrete evidence of round tripping or market manipulation by commercial banks has been found in the context of the MPR, TBR, and GRR. However, broader issues related to financial practices and economic challenges in Ghana are under discussion, such as the potential impact of high returns on treasury instruments on bank lending. Addressing these concerns would require a comprehensive evaluation of specific financial reports or audits related to Ghana's banking sector.
The Ghana Association of Banks (GAB) has refuted suggestions that banks in the banking-and-insurance industry could be engaging in market manipulation, citing the banking regulator's strict measures and monitoring as a deterrent. In response to the Institute for Economic Affairs (IEA) report, GAB's designated contact person, John Awuah, asserted that market manipulation is 'impossible' due to the central bank's stringent policies. Despite the IEA's concerns about discrepancies between Monetary Policy Rate (MPR), Treasury Bill Rate (TBR), and Ghana Reference Rate (GRR), Awuah emphasized that the banking sector is under close scrutiny by the central bank. The lack of concrete evidence of round tripping or market manipulation, as reported by the IEA, highlights the need for a comprehensive evaluation of specific financial reports or audits related to Ghana's banking sector to address broader financial practices and economic challenges in the banking industry.
