BoG closes the door after Beige Bank

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The Central Bank has placed a freeze on licensing of new banks and other financial institutions as part of its aim to strengthen supervision, which will come as a blow to investors seeking to enter the financial space without recourse to existing institutions.

“To rationalise the banking sector to ensure efficiency, we are not going to licence or considering licensing any new banks, savings and loans or microfinance institutions during the next year as we implement the recapitalisation of banks or the existing banks, Dr. Ernest Yedu Addison, Governor of the Central Bank,” said.

Speaking at the official outdooring of The Beige Bank, the latest bank to join the fray, Dr. Addison explained that the Central Bank cannot allow potentially insolvent banks to enter the industry.



“We need to manage entry to ensure that down the line we would not have to then manage exit as we did this year. This would help us to ensure solvency and stability in the banking sector,” he told bankers and other financial industry players.

The Central Bank, in August this year, withdrew the licences of two banks –Capital and UT banks– due to capital deficiency, weak risk management system, and weak corporate governance structures.

New licence regime

Dr. Addison explained that at the end of the reform and recapitalisation process, which will come to an end in December, 2018, the BoG will introduce a new licensing regime that would align with the overall financial sector landscape.

“The new regime will seek to deliver a strong, solid, well capitalised and geographically diverse financial landscape that is well positioned to support the government’s transformational agenda,” he added.

The launch of The Beige Bank

Dr. Addison said the Beige Bank is one of those banks that have met all the requirements for it to operate as a full-fledged universal bank.

“To The Beige Bank and all other banks, especially local banks, let us not lose sight of the privilege that we have been given and the trust imposed on us to manage depositors’ funds. With integrity as one of the core values of The Beige Bank, I believe you will work hard towards strict adherence and strict practises in the years ahead,” he said.

Chief Executive Officer of the new bank, Mike Nyinaku, said: “Today, we are lucky to have a bank; already, we have an asset manager, a life insurance company, a health insurance company and a pension funds manager. All our subsidiaries combined, together with our investee affiliates, provide direct employment to about 5,000 individuals.

So, as you can tell, that foundation we’ve been working at is gradually taking shape and we are convinced that next year by now when we would be marking our 10th anniversary, if God wills, that foundation would be complete.”

GH¢400m capitalisation and local participation

Mr. Nyinaku noted that the Central Bank’s recent decision to increase the minimum capital requirement of banks to GH¢400m and the closure of the UT and Capital Banks have had a significant impact on confidence in local institutions.

“What’s most disturbing about this is the seemingly un-informed speculation about what could befall institutions that are unable to meet this requirement.  This has resulted in a drastic flight of deposits from local or young institutions to others, a situation which is gradually raising the cost of deposit acquisition despite the gradual reduction of the prime rate,” he said.

He also cautioned that if this trend continues, financial performance and, ultimately, shareholder reserve positions would be negatively affected and in the end, shareholder reserve positions would also decline.

“I pray that this forecast will not materialise because it would further weaken the bargaining capacity of local banks as we go to the market in search of capital,” he said, while calling for a bit more clarity from the Central Bank on the future of local institutions.

He added that local participation in the banking sector could further dwindle from the current 21percent control of total assets if some of the modalities of the recent capital increase are not given a relooked.

“We stand the risk of literally gifting the absolute control of our financial services sector – the gateway to every economy, to foreigners in the interest of economic development.

And for the life of me, I can bet that the original intent of this government would not be to marginalise local participation in the financial services space, the gateway to every economy.

Plus, I’m sure that we would be depending on Ghanaian banks to provide services in particularly the non-urban districts where that One-District-One-Factory initiative would be implemented. It is also dangerous to sort of create a mindset amongst Ghanaians that as for us, we can’t do this,” he added.

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