Bank Of Ghana’s Directives Must Not Work Against Indigenous Banks

The Bank of Ghana (BoG), last year September, announced a new capital requirement of GH¢400 million for banks to operate in the country. According to the BoG, the banks would be given up to December 2018 to fully meet the new capital requirement. This means, at the end of the deadline, any bank that has not met the new capital level would lose its license to operate in the country.

Following the promulgation of the Banking Law 1989 (PNDCL 225), when the first capital requirement was set at a minimum to paid-up capital, increases that have come through thereafter have not matched this proposed new increase.

The quantum jump of the capital requirement, from the current GH¢120 to GH¢400 million, represents an increase of 233.3 percent from the previous, the biggest ever on the banking landscape. Proponents of the increase in the capital requirement say as the banks look for various options to raise money to meet the minimum capital required, some of them will be forced to enter into mergers, which will lead to market consolidation and enable the creation of banks that are better able to finance large projects.

On the other hand, some leaders in the financial industry have proposed that the planned capital increase should be staggered, such that existing banks should be given some period to meet it. The Chronicle believes this new directive will go a long way to put indigenous banks to distress and eventual collapse them.

According to the Daily Graphic, sources within 10 indigenous banks, which are most likely to suffer under the new directive, have said the intention of the BoG was to solve a problem, but it was likely to create a bigger challenge for the economy.

More than 3,000 professionals in the banking sector are expected to be affected in a move intended to, among other things, reduce the banks' operational costs, as they consider many options, including mergers and acquisitions, to raise the required minimum capital and beat the deadline. According to the Daily Graphic, the only option left was for the banks, which would not be able to raise the minimum capital, to allow themselves to be absorbed by the international banks.

Ghana's banking sector, especially the indigenous banking division, has recently suffered setbacks, after the assets and deposits of UT Bank and Capital Bank were taken over by GCB Bank.

The takeover confirmed alarming reports of some eight banks which were also under distress. President Akufo-Addo, addressing participants at the 2nd African Economic Transformation, hosted by the African Centre for Economic Transformation (ACET) in Accra, urged African nations to develop and implement policies that would promote the growth of home-grown financial institutions to spur on the continent’s transformation agenda. The Chronicle buys into the President's idea, and we hope government policies should be seen to promote this noble plan. Indigenous financial institutions are fundamental to the development of every economy, and our next door neighbour, Nigeria, is a dazzling example.

Therefore, any directive of the BoG, which seeks to undermine the operations of the banking industry, should not be supported in any way. We should rather be seen to be discriminating positively in favour of Ghanaian indigenous banks to spur on the nation's economic transformation agenda for a seamless transition to the continental agenda.