BoG ready for recapitalization of undercapitalized banks - IMF

A Staff report by the International Monetary Fund has noted that the Bank of Ghana has approved the recapitalization plans submitted by undercapitalized banks.

The report added that most banks have submitted their recapitalization plans to the Central Bank.

According to the requirements, undercapitalized banks will at a minimum inject one-third of the capital required annually for each of the three years ending in 2025 to reach a 13.0% Capital Adequacy Ratio without regulatory forbearance.

The IMF noted that the move will ensure that banks’ capital needs have been estimated based on reasonable forward-looking assessments of losses from government debt restructuring and increases in Non-Performing Loans.

However, banks are expected to comply by the BoG’s directives by the end of March 2024.

“The BoG [Bank of Ghana] will initiate corrective measures by end-March 2024 against banks that fail to uphold these recapitalization requirements (new structural benchmark). In the short term, the BoG [Bank of Ghana] stands ready to deploy contingency measures if needed to ensure financial sector stability,” parts of the report as quoted by myjoyonline.com read.

The report further noted that the National Investment Bank’s solvency issues will be addressed soon.

“The authorities [government, BoG] also aim to address the legacy issues of the financial sector and strengthen the governance of state-owned banks. The remaining tasks from the earlier sector cleanup include addressing the challenges of NIB and long-standing undercapitalization of several special deposit-taking institutions (SDIs),” the report said.

SSD/NOQ

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