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30.01.2009 General News

Recapitalisation Of Banks Will Boost Cocoa Sector-BOG

By The Ghanaian Time

Recapitalisation of the country's commercial banks will enable them to support important sectors of the economy, says Mr Frank Belnye, the Deputy Head, Banking Supervision Department of the Bank of Ghana (BoG).

'financing of the cocoa crop is one activity that requires lumpy funds over a short timeframe every year'', he said.

Speaking at a day's seminar on banking recapitllisation in Ghana in Accra yesterday, he said funding to support the cocoa sector is usually sourced offshore partly because of the banking system's inability to meet requirement.

The seminar was organised by the chartered Institute of Banking landscape vis-à-vis the reecapitalisation process.

The BoG last year in consultation with industry players set the minimum capital requirement for universal class one banks at GH¢ 60 million from a paltry statutory minimum of GH¢ 7 million cedis in 2006.

Mr Belnye said 'looking at the minimum lifting of crude oil that is likely to be associated with the up-coming oil industry our banks will be hard pressed if they are to participate in this activity at their current levels of capital.'

'It therefore makes sense to recapitalise our banks and position them to take active role in these economic activities,' he said.

Mr Belnye indicated that regulatory capital provides a cushioning for absorbing potential losses and as such a critical component for ensuring the safety and soundness of the financial system.

'Generally: well-capitalised banks are better positioned to grow their lines of business compared with others that are under capitalised', he added.

Mr Belnye said in view of the crucial role that a vibrant banking sector plays in initiating   and sustaining economic growth, the central Bank will continue to pursue policies that will create the enabling environment for the banking sector to operate effectively and efficiently.

Mr Joseph B.W. Winful, a senior partner of KPMG, Ghana, told Times Business in an interview that his outfit deems it necessary to sensitise major players in the industry on how best they can meet the minimum capital requirement.

He said it is important that banks are adequately empowered to enable them to effectively address pressing financial issues, particularly funding development projects in the country.

Currently, the banking system in the country comprises a central bank, 25 major banks, the ARB Apex Bank and 128 rural and community banks.

The number of foreign banks that have established subsidiaries in Ghana has increased from six in 2005 to 12 as at the end of 2008.