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Fidelity Bank, a Ghanaian owned bank has revealed to Ghanaians, the secret to its ability to meet the minimum capital requirements set by the Bank of Ghana in 2017 leading to its continuous operations.
Mr Edward Effah, the Chairman of the Fidelity Bank, at a news conference in Accra on Friday said the Bank of Ghana (BoG) undertook asset quality review, and about nine banks were identified as distressed and deficient in capital, adding that remedial measures or capitalisation plan was agreed.
He said the BoG increased minimum capital requirement for Banks from GH¢120 Million to GH¢400 Million in 2017 leading to withdrawal of licenses, purchase and assumption of banks, and consolidation of five banks.
He disclosed that the Fidelity Bank got its capital requirement from fresh capital injection and income surplus capitalisation, explaining that its income surplus was 20 million in April 2018, 70 million in October 2018 and 50 million in November 2018.
The strength of Fidelity Bank in a challenged environment was from its capital, strong liquidity position, earnings quality, quality of management and staff, sound risk and corporate governance principles.
Fidelity Bank’s capital strengthened the bank by supporting its operations, acting as a cushion to absorb unanticipated losses and providing protection to uninsured depositors and debt holders in the event of liquidation.
Fidelity bank ranked the first among the top 10 banks with Capital Adequacy Ratio of 27 per cent at December 31, 2017 and as at December 31, 2018, the Bank had a loan-deposit ratio of 27 per cent and a liquid ratio of 215 per cent.
Mr Effah noted that, Liquidity and profitability trade off and Fidelity Bank had not allowed the quest for profit to trade supersede its liquidity requirement.
He said the Bank didn’t need to raise its minimum capital requirement just to meet the Central Bank’s demand but also to grow its business.
Responding to whether the Bank would be comfortable if the BoG re-increases the Capital in the near future, Mr Effah said: “We don’t envisage a significant increase in the capital requirement but we are ready as a Bank. We should always remember that these are good policies for banks, they are not there to obstruct banks, but to make them more prudent and safer”.
“I think the Central Bank has done well in the last two years in making sure that the financial sector is stronger and that banks have adequate capital to do their businesses with right corporate governance, and that people who run banks are fit and proper”.
The Chairman noted that the Bank of Ghana should be recommended for protecting the ordinary man on the street, salaried workers and pensioners who saved their monies in banks, adding that ‘nobody would be willing to keep his or her money at a bank that is not secured’.
Mr Effah reiterated that if the state does not support the BoG, it would have repercussions on the economy, because every strong economy has strong banks.
He said another reason for the Fidelity Bank’s success was its partnership with International financial entities, saying, ‘banking is not a local business but international and to be a strong bank, you need other banks to work with”.
He therefore advised all financial institutions to partner foreign financial entities for a platform to learn and employ new and better skills and knowledge to enhance their growth.
Mr Effah said the Bank had also contributed significantly to the socio-economic development of the country through projects such as supporting Small and Medium-sized Enterprises and funding the construction of about five power stations built recently for the country.
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