Bank of Ghana has ruled out reviewing the new capital requirement of GH¢400 million, directing banks that cannot recapitalize to opt for a lower license.
Commercial banks in the country are expected to by the end of December 2018 increase their stated capital from GH¢120 million to GH¢400 million.
Speaking at the launch of the 5th anniversary of the Royal Bank, the advisor to the Governor of the Bank of Ghana, Grace Akrofi said, “The upward adjustment was done as part of a holistic reform plan to further develop, strengthen and modernize the financial sector to support economic development.”
She said, “in this regard, we encourage small and undercapitalized banks with corporate governance challenges among others, to merge and consolidate their operations”.
“over the years…measures have been put in place to improve the supervision and regulation of banks and specialized deposit-taking institutions to ensure a safe and sound financial system. Of particular importance is the recent increase in the minimum capital requirement of banks from GH¢120million to GH¢400million by end of this year,” she said.
Grace Akrofi said the new minimum requirement offers valuable opportunities for consolidation within the banking sector.
She said, “As the central bank, we believe that there are more benefits to be gained from consolidation, hence our bias in encouraging mergers in the industry.”
For instance, the consolidation process is expected to lead to the emergence of big banks to help finance high-valued projects that would be transformative for the Ghanaian economy.
The new Banks and SDI Act has made provision for the establishment of criteria for mergers and acquisitions which addresses in more detail what the Bank of Ghana must consider in determining whether or not to approve a merger or amalgamation under the Act.
These include consideration of competitive effects, financial and managerial resources of the institutions involved, the convenience and needs of the community to be served, the risk to financial stability, and the effectiveness of the institutions involved in combating money laundering and terrorist financing.
“Banks should, therefore, take advantage of these considerations and its associated benefits in detailing plans towards meeting the minimum capital requirement by December 2018.”
JoyBusiness understands some banks are seriously pushing for a new arrangement that would still result in them having the universal banking license, with a lower capital requirement, what some are calling a tier system.
Savings and Loans
Meanwhile, the Bank of Ghana said institutions that cannot meet the new level could be asked to take up Savings and Loans license. Sources say that could be one of the reasons why the capital requirement for that sector is likely to be increased from GH¢15 million to possibly GH¢40 million.
The development may force some consolidations in the sector, paving the way for the commercial banks to move to that area soon after December 2018.
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