With the consummation of three mergers and the impending issuance of bonds by the Ghana Amalgamated Trust to recapitalize five indigenous banks, the restructuring of the country’s universal banking industry is drawing to a close at last.
However there are major challenges still to be resolved and with them plenty of scope for more controversy.
One of the biggest of those issues is that of job losses. Already, well over 2,000 jobs in Ghana’s banking industry have been lost to restructuring and there are inevitably more job losses to come as consolidation in the industry takes practical effect.
Most of the job losses have resulted from the consolidation of seven indigenously owned erstwhile banks into the recently established, wholly state owned and aptly named Consolidated Bank Ghana last year.
Those job cuts came on the back of hundreds of others lost in 2017 when UT Bank and Capital Bank had their operating licenses revoked by the Bank of Ghana, with their liabilities and some selected assets being taken over by GCB Bank through a purchase and assumption arrangement.
This year, new job losses are resulting from the completion of three mergers – those between First Atlantic Bank and Energy Commercial Bank; Omni Bank and BSIC; and First National Bank and GHL Bank respectively.
To be sure, staff layoffs are inevitable in virtually every type of merger and this phenomenon is stronger in the banking sector than in most others, because not only senior management positions at the head office become duplicated; entire bank branches become duplicated too following a merger or acquisition.
This is because in many locations each of the merging banks already have fully fledged branches, their respective choice of branch location each having been determined by the same considerations.
Inevitably therefore, following the merger one of the two branches of what is now one single bank has to be closed.
Ironically, even as the public sympathizes with the bankers who are laid off – often blaming the banks for doing so as if it was entirely out of choice rather than unavoidable circumstances – it is those very job losses that ensure that customers are offered a better value proposition than hitherto as synergies are brought into play and cost to income ratios are improved through the elimination of duplications of both key staff and bank branches.
The public has been inundated with tales of woe from staff who have been laid off since banking sector restructuring began.
But while such stories aim to evoke public sympathy the truth is that the employees laid off in the banking industry are generally much better off, for two basic reasons, than their counterparts who suffer a similar fate in other sectors, for reasons of consolidation or downsizing.
One is that those who lose their banking jobs are much better positioned to get new employment than their counterparts in other sectors.
This because despite the recent travails of the financial services industry, it is still far more vibrant than most other sectors, being replete with many genres of financial intermediaries, from savings and loans companies and rural banks, to specialized deposit taking non-bank finance and leasing houses, and microfinance institutions.
Not only are many of them willing to employ professionally trained and experienced bankers to strengthen their service delivery capacities, but they are direly in need of them, going by the inordinately weak professional capabilities many of them suffer from.
Indeed, most former bank employees who remain unemployed retain that status either because they are unwilling to take a pay cut – other genres of financial intermediation institution are hard put to match the salaries that the banks can offer – or because they are simply too comfortable financially to take another paid employment.
Indeed, the latter situation is far more common place than laid off bankers would want the public to believe. To be sure there have been inordinate delays in separation packages in some cases, especially where the employing bank went under due to financial difficulties. But in most cases, bankers are laid off with severance packages that most other people in paid employment would justifiably envy.
This is especially the case with mergers that create on-going enterprises, and where staff are laid off simply to prevent unneeded duplication of functions.
Here, the staff being laid off from the recently concluded merger between First Atlantic Bank and the erstwhile Energy Commercial Bank make for an illustrative example.
They are receiving one and a half months of basic salary for the number of years they have worked with the bank as well as another one month’s basic salary in lieu of one month’s notice of termination of employment.
Add to this conversion of all accumulated leave outstanding into cash, a 20% discount on the balances all loans taken from the bank and still outstanding and transportation allowance as well.
To be sure this is not easily replicated; indeed it is the best severance package offered so far by any bank following the restructuring process and it has only been made possible by the exemplary financial health of First Atlantic.
However it does show how staff lay offs can be done smoothly and painlessly – any laid off staff of that particular bank who complains would clearly be crying wolf with a falsetto voice.
Indeed the way First Atlantic is going about its inevitable job cuts should serve as a model for Ghana’s banking industry as the last round of redundancies are implemented.
It would thus also serve as incontrovertible proof that job cuts in the banking industry are not necessarily a bad thing.