Gov’t supports increase in capital requirement of commercial banks

Dr. Abdul Issahaku, Governor of Bank of Ghana

The government of President Akufo-Addo has endorsed the Bank of Ghana’s move to increase the minimum capital requirement of commercial banks in the country.

The move, according to the Minister of Finance Ken Ofori-Atta, is expected to help minimize systemic risks in the banking sector in Ghana.

Presenting the 2017 budget statement of the government, Mr. Ofori-Atta said the government was committed to collaborating with the central bank to undertake some structural reforms within the banking sector in Ghana.

“The Bank of Ghana in collaboration with Government, will undertake the following structural reforms to the banking sector: Increase the banking industry’s minimum capital requirements and strengthen the licensing and regulatory framework.”

“Introduce risk capital requirements in addition to minimum capital requirements for banks,” the Finance Minister stated.

The government also promised to ensure managing directors and board chairmen of all commercial banks in Ghana do not go beyond their tenures, in accordance with the Banking Act, Minister of Finance, Mr. Ofori-Atta said.

There is also going to be the enforcement of single obligor limit for commercial banks while supporting the mobile money and mobile banking businesses which should enhance and expand financial inclusion, he said.

Mr Ofori-Atta further noted that the government would introduce measures to deal with the bottlenecks in the banking sector in the country.

He said: “Banks play an important role in our economy. Despite past interventions, the banking sector still faces major challenges. We are committed to working with the financial sector to resolve these challenges. A strong private sector credit growth is needed to support our medium-term GDP growth to increase productivity and create jobs.”

“We will harmonize and streamline some of the existing policies to make the sector more efficient. Policy interventions will focus on improving liquidity for banks through the payment of SOE related debt due banks over the short to medium-term in line with our debt sustainability framework,” he added.

Some banks in Ghana have lauded the decision by the central bank to increase the minimum capital requirement of banks.

According to them, this will provide a platform for banks to perform bigger transactions and intervene in the productive sectors of the economy.

The central bank has for some time now given indications of a possible increase of the minimum capital that commercial banks must have in order to operate in Ghana. The move, some industry watchers have said, is one of the several measures being considered to limit the number of banks in operations and improve upon their financial position which will also allow them to finance bigger projects in the country.

Currently, commercial banks operating in the country are expected to meet a regulatory minimum capital requirement of GH¢120 million.

Though it is unclear how much the revised minimum capital for commercial banks will be, some industry watchers have suggested that the central bank may review the capital to GH¢200 million.

–The Business and Financial Times

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