Local banks CEOs run to President for cover in GH¢400m minimum capital requirement

• Posted on April 10, 2018
• by Nana Kwesi Coomson
• Comment

Heads of indigenous banks in the country have met the President, yesterday, in a desperate move to have him intervene in a new capital requirement they claim could destabilise local banks.

Sources said the meeting ended inconclusively, and the bank managers are likely to return to the presidency today with the hope that the President, Nana Akufo-Addo, will soften the hearts of the officials at the Bank of Ghana to reduce the minimum capital requirement of GH¢400 million.
They had earlier on petitioned the President to intervene, and decided to follow up with a meeting.
Even though the Ghana Association of Bankers met with the Financial Committee of Parliament on general issues affecting the banking industry, the issue of the minimum capital requirement came up strongly, with the local bank managers seeking the committee’s intervention as well.
The committee is yet to intervene on the matter.
Per a new Bank of Ghana law, all banks are to have a new minimum capital requirement of GH¢400 million before they can operate.
Before the new law, the banks had a minimum capital requirement of GH¢120 million. The increase to GH¢400 million represents a 233% increase.
It is part of measures by the Ernest Addison-led Bank of Ghana to strengthen the banking sector, which has already seen some volatilities with the takeover of at least three local banks.
All the remaining banks, local and foreign, have until the end of December 2018 to raise the minimum capital or risk folding up.
With some eight months away from the deadline, some local banks say the GH¢400 million is too high a demand to meet.
Already, UT Bank, Capital Bank and Unibank, all local banks, have been taken over due to poor financial management.
Some of the remaining local banks fear that if the Bank of Ghana fails to rescind its decision by reducing the minimum capital requirement, they might fold up.
According to the chairman of Parliament’s Financial Committee, most of the local banks blame the government for the poor financial state they are in.
Dr Mark Assibey, who was part of the meeting with bank managers in Parliament, quoted the managers as saying about 70% of the bad loans have government involved.
Govt bad debtor?
The managers said if the government, the biggest debtor in the financial sector, pays its debt owed them, the sector will become vibrant again.
They were hoping the committee would intervene on behalf of the local banks and get the minimum capital requirement reduced.
However, Dr Assibey rejected the plea for a reduction in the minimum capital requirement.
He said every bank worth its salt must be able to raise the minimum capital requirement of GH¢400 million.
He said it is not for nothing that the financial sector has various categories, including micro-finance, savings and loans, all of which have different capital requirement.
He said if it is the case that local banks cannot compete as a bank, they can compete in other financial sectors.
But the spokesperson of the Minority on Finance, Casiel Ato Forson has disagreed.
According to him, before the NDC would leave power in 2016, a decision was taken at the Bank of Ghana to increase the minimum capital from GH¢120 million to GH¢230 million.
He was surprised the NPP government decided to ignore the GH¢230 million proposal and rather decided to peg it at GH¢400 million.
He challenged the government to provide the basis for such an increase, saying the GH¢400 million will collapse the local banks.

-joy