Recapitalisation, mergers loom in banking sector

BANKS in Ghana could anytime soon be compelled by the Bank of Ghana (BoG) to double their stated capital to GHC120 million, Business Finder understands.

This follows a prescription by the International Monetary Fund (IMF) concerning the bank’s high exposure to non-performing loans, interest risks, and liquidity constraints.

Even before the Central Bank applies the new minimum capital requirement some banks including SocieteGenerale and CAL bank have begun the process to increase their stated capital above the GHC120 million cap.

Last year, accounting professional, KPMG, conducted a stress test on banks operating in the country. This was after the IMF directed the BoG to conduct the test after an assessment of the Ghanaian economy.

Though the regulator has remained tight-lipped about the result, it is believed that banks exposure to credit and interest rate risks are very high.

Some market watchers are confident that any decision to up the capital requirement of the banks would trigger some mergers and acquisitions in the sector.

Already, Ecobank Ghana has not ruled out acquiring another bank in Ghana to consolidate its gains in the very tough banking sector.

Its Group Chief Executive Officer, Ade Ayeyemi, disclosed this at the Ghana Stock Exchange (GSE) organised Facts Behind Figures programme last week.

Running mate of the opposition New Patriotic Party and a former deputy Governor of the Bank of Ghana, Dr. Mahumudu Bawumia also revealed that the IMF was pushing the BoG to recapitalise the banking sector because of its high exposure to government borrowing, bulk oil distributors, interest rates among others.

Banking Consultant, Nana Otuo Acheampong told Business Finder the move to recapitalize the banks are still ongoing. “What is not certain is whether the Bank of Ghana will use the ICAP-which is a method of ranking banks by their capital or sizes or the regulatory method which will require fixed capital for all banks.”

Presently, the Central Bank has tabled two bills before parliament which when passed into law will replace the Bank of Ghana Amendment Act, 2007, Act 738.

They are the Depositors Protection Bill and Special Deposit Bill. While the Special Deposit bill will give all powers to banks to resolve financial institution challenges, the Deposit Protection bill will give guarantee or power to depositors with regard to their savings.

Nana Otuo Acheampong explained further that if the regulator had its way it will recapitalize the banking sector before the end of the year.

In 2008 when the minimum capital of banks in Ghana was increased from GHC15 million to GHC60 million, the motive was to consolidate the sector. However, all the banks were able to meet the minimum capital requirement.

Presently there are 29 banks operating in Ghana with the number expected to shoot up to 32. Seven of them are however tier one banks including Fidelity Bank and Zenith Bank.