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25.08.2005 Business & Finance

Banks asked to meet minimum capital requirement or

GNA

Accra, Aug. 25, GNA - Banks which are unable to meet the minimum capital requirement of 70 billion cedis by the close of December next year risk having their operations closed down, the First Deputy Governor Emmanuel Asiedu-Mante warned on Thursday.

Speaking to journalists shortly after the opening of a conference on the new Banking Act (Act 673), Mr Asiedu-Mante said the Bank of Ghana would have no other option left to it than halt the operations of banks, which at the end of the three-year grace period given by the Law were still not able to fulfil the minimum requirement. He said the higher level of capital adequacy of 10 per cent being required from the banks in line with international best practice was to ensure that the risk profiles of not just the banks, but also their subsidiaries, were captured.

"Both the increased capital adequacy ratios and the prescribed minimum capital levels are designed to give the banks sufficient absorptive capacity for risk taking and the bearing of losses when they do arise," Mr Asiedu-Mante said.

Financial experts, bankers and industry players from the Bank of Ghana are analysing the new Banking Act (Act 673) and its impact on the country's financial sector.

The conference is to examine the Basle Accord, which the Act seeks to introduce in the Ghanaian financial sector. The Basle Accord introduces strict international best practices within the banking industry to promote security in international banking. Mr Asiedu-Mante said the current Act, which was a second major review of the Banking Act of 1970, granted the Central Bank its operational independence such as the powers to grant and withdraw the licences of banks.

Besides, the Act also empowers the Central Bank to vary the lending limits of the banking industry or of a particular bank based on its assessment of the industry or bank in question. The Deputy Governor explained that the powers vested in the BoG were to ensure the confidence and stability of the financial market and to ensure that banks did not assume undue risk and put depositors' funds in jeopardy.

He said while the Act provided a solid platform for the regulation of banking business in the country, there was the need to pass the remaining pieces of legislation such as the Money Laundering Bill, Foreign Exchange Market Operations Bill, Offshore Banking Bill and Electronic Banking Bill to enhance effective regulation and supervision. Mr Kwadwo Baah-Wiredu, Minister of Finance and Economic Planning, said to remain effective banks should under no circumstances be likened to miracle banks schemes or any such scam.

He said the most effective way to guarantee trust in the industry was to strictly apply the stringent test, especially for directors of the banking business, to weed out the bad nuts. It is in this direction, that the BoG's powers had been enhanced under the law to apply the first and proper test to board and senior management nominees to ensure that affairs of the banks in Ghana were not conducted in a manner detrimental to investors and prejudicial to the bank and its customers.

He said an independent Central Bank was essential to gain the trust and confidence of both domestic and external stakeholders.

Ms Adelaide Benneh, Principal of the National Banking College, said the provisions of the Act would not achieve the intended objectives if the key people implementing it did not get the chance to appreciate it. She said creating awareness about the provisions of the Act was important to build public confidence and make the job of attracting money from the informal sector to the banking system easier.

The conference was organized by SPEED Ghana and the National Banking College. SPEED is a support programme for private sector development financed by the German Technical Assistance (GTZ) and Danish International Development Agency (DANIDA). 25 Aug. 05

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