Deadline for new capital requirement hitting hard

The Central Bank
Bank of Ghana

Four months to the deadline for banks to meet the new minimum capital requirement and a number of financial institutions are showing positive. For one, Societe Generale has given the strongest indication that it is on course to meeting the GH¢400 million minimum capital requirement.

Some may argue that Societe Generale is not an indigenous bank and would therefore find it within reach to raise the amount. Indigenous banks, on the other hand, are most likely to suffer under the BoG’s directive.

However, three banks-the GN Bank, Sahel Sahara and Premium-are on the verge of concluding merger talks to meet the BoG minimum capital directive. Although this falls in line with the options open for smaller, less capitalised banks as the BoG has suggested, it feeds into the perception that smaller indigenous banks that are not able to meet the new capital requirement will allow themselves to be swallowed up, or absorbed by international banks.

Two of the banks, GN and Premium are indigenous banks but Sahel Sahara if a foreign-owned bank with its headquarters in Libya. This concern for indigenous presence in the banking sector has seen some indigenous banks form an association called association of Indigenous Universal Banks are that given the present circumstances, it would be virtually impossible for local banks to meet the new capital requirement by December, 2018, and thus asked for an extension on the basis that mergers and acquisitions are time-consuming affairs.

The Association went as far as petitioning the President in April this year, but an extension was considered not feasible since the BoG dropped the hint virtually two years ago, giving ample time to negotiations to be concluded.

Well, the argument for indigenous banks’ presence is appealing and inspires nationalistic sentiments but when it is considered that for a population under 30 million, we have 34 banks operating in the system seems like for every million people, there exists a bank to cater to their needs sounds a bit superfluous.

If we are to consider that Nigeria with a population size of 180 million, has only six banks suggests that we have far too many banks in the system and there is a need to prune some off. Sad as it may seem, though the new requirement disfavours some indigenous banks, the merger and acquisition option open to them must be uitilised to ensure a resilient financial sector.

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