Local banks to receive gov’t cash…to meet GH₵400m capital by Dec 31

Governor of the Bank of Ghana, Dr. Ernest Addison

Government is to support ‘well-governed and managed’ local banks meet the new minimum capital requirement of GH₵400million set by the Bank of Ghana by December 31, 2018 deadline, Dr. Ernest Addison, Governor of the central bank, has disclosed.

Speaking shortly after the Annual General Meeting of the Ghana Association of Bankers (GAB) in Accra, the regulator indicated that government has assured the Bank of Ghana it will be providing financial support to other indigenous banks to help them meet the minimum capital requirement of GH¢400million by December 31, 2018.

He however warned that: “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 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,” he noted.

He added: “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”.

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Mr. Frank Adu, Managing Director of CAL Bank – a local bank, noted that while bankers generally support the central bank’s move to clean up the sector, there are lingering concerns that local banks may be worse-off.

“From the point of view of the association, while we generally support the actions taken by the central bank to address various shortcomings in the financial sector with regard to some of our colleague banks, we are also concerned about the image that some of these actions have created.

“These actions, although very positive in the sense that they are securing the sanctity of the banking sector and making sure customers do not lose deposits, and are meant to build further confidence in the banking sector, give cause for concern,” said Mr. Adu, who is also Vice-President of the association.

The central bank last week revoked the banking licences of five indigenous banks – uniBank, Sovereign, BEIGE, Royal and Construction banks – due to their levels of insolvency and irregularities in the acquisition of licences by two of the five affected banks.

The central bank subsequently created a bridge bank, the Consolidated Bank Ghana Limited, and transferred all deposits held by the five affected banks- including their assets and liabilities – to this new entity.

To give the new entity a clean bill of health, a GH₵5.6billion bond was issued on the same day to clear the net liabilities of the five affected banks. A further GH₵450million was provided as starting capital for the Consolidated Bank Ghana Limited.

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Exactly a year ago, the banking sector regulator also revoked the licences of UT and Capital Banks, both indigenous banks, and allowed their purchase and assumption by GCB Bank, a public lender.

These actions came alongside the introduction of a raft of directives including the increment of banks’ stated capital from GH¢120million to GH¢400million with a December 2018 deadline; and enforcement of Basel II and III and IFRS9 banking rules and regulations – leading to some indigenous banks petitioning the Presidency for more time.

“To the extent that all these actions seem to have affected local banks, and even though the Governor had on occasions mentioned that not all local banks are in trouble, it would appear that if we are not careful this tsunami and its effects may be extended and therefore cause problems – not for only local banks but also for other banks,” Mr. Adu said.

To Mr. Adu, it is important for the central bank to reassure the public that beyond the actions it has taken, the financial sector – whether foreign or local – is strong; and it is the strength of both sets of banks that make the banking sector strong.

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