Banking sector remains strong despite challenges – discussants

The banking sector is ‘sufficiently strong’ and is not in distress as initially feared, although pockets of challenges still remain, the Central Bank and other banking sector analysts have assured.

Country Senior Partner of accounting and auditing firm PwC, Vish Ashiagbor, said: “The sector is sufficiently strong for what we need it to do for us as a country. That being said, we all know there are pockets of challenges. But that’s why there are a lot of initiatives on-going.  By December this year, all those initiatives having been implemented, we should see a stronger sector emerging.

The strength of the sector that emerges could be as a result of the exit of, maybe, some of the weaker participants or the further strengthening of the already stronger ones. Overall, I would not suggest the sector is in distress. There are pockets of challenges.”

He was speaking at this year’s Graphic Business/Stanbic Bank Breakfast Meeting in Accra, which sought to assess the health of the banking sector and the key reforms being implemented or which ought to be implemented to strengthen the sector.

Mrs. Elsie Awadzi, the 2nd Deputy Governor of the central bank agreed with Vish Ashiagbor, saying: “The banking sector is sufficiently strong” and not in distress as some analysts have said.

Head, Corporate & Investment Banking at Stanbic Bank Ghana, Mr. Kwamina Asomaning, also said most of the banks seem to have recovered from the shocks that they faced in 2015/2016.

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“The industry is largely healthy. The banks have just published their financial statements and, if you look through it, you can see that most have recovered from the shocks that they faced.

We should also acknowledge the efforts that the banks themselves have taken. A lot of shareholders have delayed or suspended their dividends and reinjected their profits, quiet a number of shareholders have injected additional capital to boost the balance sheet of banks. The banks themselves have become much more vigilante than they were previously,” Mr. Asomaning said.

Challenges in the banking sector

The Bank of Ghana (BoG) has, over the past eight months, sought to sanitise the industry, though a lot remains to be done.

On August 14, 2017, the BoG approved a Purchase and Assumption transaction with GCB Bank Ltd. that transfers all deposits and selected assets of UT Bank Ltd. and Capital Bank Ltd. to GCB Bank Ltd. It also revoked the Licences of UT Bank Ltd. and Capital Bank Ltd.

According to the central bank, the action became necessary due to severe impairment of the two institutions’ capital.

On March 20, 2018, the BoG also announced that it had placed uniBank under administration for a minimum of six months to save it from imminent collapse – in line with powers conferred on it under Sections 107 and 108 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). Accounting firm KPMG was appointed as Official Administrator for the bank.

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“Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%),” Dr. Ernest Kwamina Yedu Addison, said the BoG Governor.

Strength of local banks

B&FT’s analysis of current paid-up capital and income surpluses of all 34 universal banks operating in the country shows that apart from GCB, which has a total paid-up capital of GH¢703million, GH¢100million being paid-up capital and GH¢603million in income surplus as at July 2017, local banks with capital shortfall would have to find millions to recapitalise.

All other indigenous banks, 17 in all, except uniBank, have a capital shortfall of between GH¢50million and GH¢320million that must be remedied by the December 31, 2018 deadline or they risk being classified as undercapitalised – a tag that may lead to the loss of significant business and ultimately their demise.

uniBank’s task at recapitalising is fairly simple, as it has a paid-up capital of GH¢310million and an income surplus of some GH¢52million, which means it is just about GH¢38million shy of the GH¢400million new minimum capital requirement.

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