Banks in frantic merger talks

Just so the central bank will not step in, a number of banks are in frantic merger talks as the December deadline for them to increase their capital base to a minimum of GH¢400million draws nigh.

Due to recent actions of the regulator, banks that are yet to meet the stated capital are talking more than they used to so that they will merge on their own terms instead of the BoG forcing them to.

“There is more activity in the market and a lot more banks are talking among themselves because of the fear that Bank of Ghana might make another move. That threat is still alive, so we are talking among ourselves but nothing has been firmed up yet,” a manager of one of the local banks told the B&FT.

After approving the purchase and assumption of assets and liabilities of the UT and Capital Banks by GCB Bank, the central bank a couple of weeks ago merged five insolvent banks in one single swoop.

This has made other banks jittery – particularly locally-owned ones with weak financial muscle, especially when the regulator has given indication it is not done with its ‘house-cleaning’ exercise.

Announcing the recent merger of the five banks, BoG Governor Dr. Ernest Addison noted that the new Consolidated Bank has been started with GH¢450million in stated capital and a government-issued bond of GH¢5.76billion to cushion it to take on some selected assets and liabilities of the five banks.

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The Governor, at a recent luncheon of the Ghana Association of Bankers (GAB), disclosed that government will support ‘well-governed and managed’ local banks to meet the new minimum capital requirement.

“Such support will be limited to indigenous banks that are solvent, well-governed and managed in full compliance with the Bank of Ghana’s regulatory requirements – and able to demonstrate that they have been unable to access private sector solutions for recapitalisation due to market conditions,” he said.

He assured that the current challenges in the banking sector are surmountable and stakeholders can positively turn these into opportunities to establish a stronger and well-capitalised banking sector to support economic growth.

“The BoG will continue to strengthen its regulatory and supervisory frameworks to promote confidence in the banking sector and financial system as a whole. We have some very good indigenous banks that are doing very well. I encourage the public to be confident in sending their deposits to our Ghanaian banks,” he said.

But the source noted that even though he does not believe the Bank of Ghana will make another move until the December deadline, banks are now fast-tracking mergers talks.

“I believe the Bank of Ghana will wait till the December deadline, but it is encouraging banks to merge…I do not see banks waiting till December, though. They are engaging in merger talks so as to avoid a forced merger by the central bank,” the source noted.

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The Bank of Ghana, in July, said only 15 banks have submitted credible plans for meeting the stated capital by the December deadline – and that leaves another 15 banks whose fates are hanging in the balance.

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