Capital Requirement: BoG to issue guidelines on mergers, acquisitions

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The Bank of Ghana (BoG) has said it will soon issue a set of guidelines to facilitate the merging and acquisitions of banks in the country which cannot meet the new minimum capital requirement.

The announcement by the Second Deputy Governor of  the Central Bank, Elsie Awadzi is coming months ahead of the deadline for banks to increase their capital base by some GH¢280 million.

The central bank last year raised the minimum capital requirement to GH¢400 million, equivalent to about US$100 million and commercial banks in the country have up to December 2018 to raise the amount, which represents a 333.3 per cent increase from the current minimum capital of GH¢120 million.

Banks were last recapitalized in 2012, when the BoG asked them to raise their stated capital from GH¢60 million at the time to the current GH¢120 million. That round of recapitalization led to the consolidation of three banks, The Trust Bank (into Ecobank), Intercontinental Bank (into Access Bank) and Amalgamated Bank (into Bank of Africa).

The deputy finance Minister Kwaku Kwarteng earlier this month urged local banks in the country to merge in order to meet the minimum capital requirement to avoid folding. That, according to him, will ensure stability of the financial sector.

Speaking Tuesday with stakeholders in Accra, Mrs Awadzi said although the Central bank is confident majority of indigenous banks will meet the new requirement, the yet to be announced guidelines would smoothen the process of possible mergers and takeovers.

“…The Bank of Ghana deemed it necessary to require all banks to increase their minimum paid up capital from GH¢120million to GH¢400million,” she stated and that a lot of steps are currently being put in place to ensure that it is “operationalized without further delay.”

“We will also ensure a smooth transition to a new capital requirement by December 2018 and in fact, we will facilitate banks mergers and acquisitions and other transactions by issuing some guidelines on the process,” she added.

Again, she disclosed that some banks which previously, lacked adequate levels of capital and were required to submit capital restoration plans to the Central Bank are being supervised keenly to ensure that they come out of their financial mess.

No looming crisis

The Minority spokesperson on Economy Cassiel Ato Forson described the hiking of the minimum capital requirement as needless, warning that its implementation will spell doom for the banking sector.

The President of the Ghana Bankers Association, Alhassan Andani, however, dismissed fears of a looming crisis in the banking sector despite some banks struggling to raise the new recapitalization amount.

“A large number of your banks,” he told sections of the stakeholders “who probably control 80 percent or ninety percent of the total deposits and access in this market [banking sector] are sound and proper and therefore there can be no grounds for talk of crisis in the banking sector.”

Source: Ghana/Starrfmonline.com/103.5FM

 

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