Rural banks urged to meet capital requirement
Rural and Community Banks (RCBs) have been advised to take steps to meet their minimum capital in order not to lose their operating licences.
According to Mr Raymond Amanfu, the Head of Other Financial Institution Supervision Department of the Bank of Ghana, any rural bank that would fail to meet the minimum capital of GH¢1 million after the passage of the “Deposit Protection Bill’’ in 2016 would have its licence withdrawn.
He stated that the RCB sector required infusion of additional capital as some RCBs continued to report Capital Adequacy Ratios (CAR) below the required minimum of 10 per cent.
Mr Amanfu gave the advice while addressing the 33rd Annual General Meeting of the Enyan Denkyira Rural Bank Limited at Ajumako Owane Saturday, Last week.
He said the additional capital aside, improving the CAR of the industry would make the sector more robust to withstand any adverse conditions and enable RCBs to assume higher volume transactions, stressing that the recent increase in capital requirement for RCBs was intended to make them stronger, better capitalised, as well as protect their customers.
He noted that liquidity was very crucial to the survival of every financial institution and, therefore, urged RCBs to ensure that they were liquid at all times so as to inspire confidence in the public.
He added that recent developments in four banks in the Central Region were worrying since some banks continued to invest in unprofitable subsidiaries and fixed assets which had serious implications to liquidity.
Mr Amanku, therefore, admonished RCBs to ensure proper liquidity management practices and avoid assets-liabilities mismatches and also increase their investment on government securities so as to ensure an effective fallback position in times of liquidity challenges.
The Board Chairman of the bank, Dr William Panford Bray, indicated that the bank generated a total income of GH¢1,794,299 for the period ending December 2014, as compared to a total income of GH¢1,516,482 in 2013.
According to him, the bank’s operational expenditure, however, shot to GH¢1,599,324 in 2014 from GH¢268,499 in 2013. He attributed this to the prevailing high cost of goods purchased.
Liabilities also grew by 10.14 per cent from GH¢4,681,426 to GH¢5,156,272, with equity also going up by 13.34 per cent from GH¢1,121,198 to GH¢1,270,761.
‘’The bank complied with the cash reserve requirements throughout the year as its secondary reserve averaged in excess of 50 per cent for the year 2014, exceeding the statutory requirement of 30 per cent,’’ Mr Bray pointed out.
He said the bank continued to exhibit exemplary corporate governance standards consistent with the mandatory legal provisions, adding that the board, through the audit and credit sub-committees, ensured good internal control processes as well as compliance with regulatory requirements and provisions.