Paid-up capital and reserves of banks have shot up by more than 22 percent since May 2019 to GH¢19.3 billion in May 2020, according to the latest Statistical Bulletin released by the Bank of Ghana (BoG).This signifies the strength of banks Capital Adequacy Ratio which is a measurement of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures.
The CAR is used to protect depositors and promote the stability and efficiency of financial systems around the world.
According to the report, paid-up capital was GH¢15.89 billion in May 2019, but jumped to about GH¢17 billion at the end of December 2019. It climbed again to GH¢18.68 billion in April 2020 and then subsequently to GH¢19.3 billion in May 2020.
The position of the banks with respect to their shareholder funds makes the banking sector stronger and robust.
With regard to the primary reserves of the banks, the Bank of Ghana data revealed that the domestic reserve went up slightly from GH¢7.1 billion in April 2020 to record GH¢6.4 billion in May 2020.
This was primarily because of the Bank of Ghana’s decision to reduce the Primary Reserve Requirement for banks and specialized deposits institutions from 10 percent to 8 percent to stimulate spending, amidst coronavirus.
Foreign reserves stood at GH¢2.27 billion at the end of May 2020, a situation which has kept the cedi relatively stable.
In terms of deposits, GHc58.4 billion belonged to the domestic fund, whilst GH¢24.7 billion were in foreign deposit.
In the March 2020 Banking Sector Report Banks, the Bank of Ghana explained that shareholders’ funds position remains strong, with the higher capital base supported by increased profitability.
The stronger profit outturn boosted the reserves position of banks, and led to an increase in the industry’s shareholders’ funds by 14.6 percent to GH¢18.28 billion in February 2020.
The previous year’s growth of 18.0 percent was because of the marked increases in the industry’s paid-up capital due to the recapitalization exercise.
The strong capital and shareholders’ funds positions also strengthen the stability and resilience of the banking sector.