Re-capitalisation of banks—Banker’s Association welcomes idea

Story: Boahene Asamoah



THE Executive Secretary of the Ghana Association of Bankers (GAB), Mr D.K. Mensah, has welcomed the Bank of Ghana’s (BoG) proposal for bank’s to re-capitalise within a period of four years.
“We are not averse to the recapitalisation of banks,” he said, adding that “our concern was to ensure that banks grow in tandem with the economic growth of the Ghanaian economy”.
Speaking in an interview, Mr Mensah said the time period the Central Bank gave to the banks to re-capitalise would obviously offer them the opportunity to plan and strategise their operations.
The Bank of Ghana, in the latter part of last year, served notice to banks under a consultative proposal to raise their minimum capital requirement from the present GH¢7 million to GH¢60 million by the end of this year.
However, the BoG has come out with a statement that has set the new minimum capital requirement for obtaining a class one banking licence or a universal banking license at GH¢60 million with a caveat.
According to the Central Bank, the existing banks were required to attain a minimum capitalisation of GH¢ 60 million by December 31, 2009. However, Ghanaian-owned banks were given a longer time period to meet the new minimum capital requirement.
It also stated that under the directive, banks with local majority share ownership would have to attain a capitalisation of at least GH¢25 million by the end of 2010 and GH¢60 million by 2012.
According to the BoG, the capitalisation requirement constituted part of the bank’s strategy to deepen the financial sector and support Ghana’s drive for accelerated growth to achieve middle-income status.
Mr Mensah said banks had all along been conscious of the need to raise their capital in order to meet the challenges and position themselves in order to take advantage of opportunities that the economy would present.
He said the position of the banks had always been to ensure a phase approach that would fall in line with the country’s vision of attaining a middle-income status by 2015.
He said the new policy from the Central Bank would position banks, especially the local ones to make strategic choices that would help them to recapitalise.
Industry players say while there would be consolidation of banks in the country, local banks would have the opportunity to look for opportunities that existed to enable them meet the new capital requirement.
Some stock market analysts anticipate initial public offers from banks to raise capital through from the Ghana Stock Exchange, which has seen the oversubscription of equities listed on the bourse over the past two years.
According to some industry players, the previous consultative position of the BoG, where it would have created a three-tier banking sector in the country would not have been a healthy development.
Only six banks, including two local banks would have been able to raise the capital while 10 other local banks would not have been to meet the new capital requirements, making them susceptible to foreign interest.
This situation would have made all the financial transactions in the country to be routed through foreign banks, a situation that would have dire consequences for the economy.
According to Mr Mensah, although the oil find presents an opportunity to banks, experience from other countries suggests that many banks do not actually patronise the oil business, because of the huge capital requirement and the risk associated with such ventures.
The Executive Secretary, however, indicated that with the new capital requirement, banks in the country would be able to finance some of the big projects such as the yearly cocoa syndication.